The update was made to allow for the Windows Sidebar to perform the following actions:
1. Generate unique identifiers for all gadgets that run in the Windows Sidebar
2. Receive a list of known vulnerable gadgets from Microsoft by using Windows Update
3. Stop a gadget from running in the Windows Sidebar if the gadget has been determined to be vulnerable
4. Stop a gadget from being installed if the gadget has been determined to be vulnerable
The list of known vulnerable gadgets is released by Microsoft on the Windows Update Web page in the Windows Sidebar Protection update. The update prevents vulnerable gadgets from being installed or from running if the gadget is already installed.
You can read more about the update
here, and download the update
here.