Last year it was agreed with the European Commission (EC) to promote the existence of alternative web browsers to Internet Explorer for Windows XP, Vista and 7 users in the European Economic Area (EEA) countries.
http://www.microsoft.com/Presspass/press/2009/dec09/12-16Statement.mspx ”…Microsoft will send a “browser choice” screen to Windows users who are running Internet Explorer as their default browser. This browser choice screen will present a list of browsers, making it easy for users to install any one of them. It will be provided both to users of new computers and to the installed base of Windows XP, Windows Vista, and Windows 7 computers in Europe where Internet Explorer is set as the default browser.”
As recently announced in the official Microsoft blog this has now begun rolling out, and there is a detailed overview in Microsoft on the Issues which shows you what to expect if you are running Windows in one of the affected countries.
There is also a KB article 976002 which covers it (and lets you know the Windows Update number to expect).
The update itself does nothing other than to present the choice to the user to select to install any of the web browsers listed (and in the case of Windows 7, unpin Internet Explorer from the task bar) - if you are already using your preferred browser then the window can be closed.
No existing binaries that are part of the OS or Internet Explorer are replaced with this update, and it does not install any services or background processes.
If the locale is not any of the EEA countries, the update will not be offered through Windows Update.