I don't know exactly what .ipsw means, but my guess is that it's something like iOS portable software or similar. The important thing is that you're right, it can take some fiddling to figure out how to get started with the iOS development world, and one of the first things you bump into is how to install a ".ipsw" firmware upgrade or beta release.

Before you even start, however, you need to register the UDID of your iPhone so that when you try to install the OS it succeeds and doesn't complain that you have an unregistered device and are left stuck. Not good.

Unfortunately, registering your phone's UDID is something that's beyond what I'm comfortable sharing because of the developer confidentiality agreement, so I'll simply suggest you either dig around on the Apple Developer Site or otherwise use Google to find the information you seek. The good news is that it's once per device so most likely you'll have to do it once and never again.

Now, assuming that you've registered your iPhone with the developer system and downloaded the latest beta or release of the iOS firmware, here's what you're probably staring at, unsure how to proceed:

Don't double click, don't drag it anywhere. Instead, go into iTunes and plug in your iPhone, then let it complete its backup and sync (if that's how you have things configured. If not, do a sync anyway, just to get the very latest data off the device before you overwrite it).

Once that's done, you should be looking at something like this:

Here's the secret: Click on the "Restore" button, but while you have the Option key (or, if you're on a PC, the Shift key) held down. Instead of just restoring, it'll let you pick a specific ".ipsw" file to restore to:

Pick the one you just downloaded and it'll warn you that, well, it's a rather destructive process:

You good? You did that last sync and all? Click on "Restore" and it'll start chugging away by extracting the actual firmware from the downloaded file...

Then some time will pass, during which time you'll see this helpful note:

Eventually it will finish up (expect ten minutes or so) and ask you if you want to start from scratch or want to restore from a previous backup of your phone:

At this point, it's probably smart to start from scratch each time to ensure that you don't drag obsolete or mis-formatted preference files or settings from a previous release, and definitely start over if you're jumping a major number (like 4.2 --> 4.3 beta), but otherwise you can take the easy path of restoring from the backup shown (which by default should be the most recently completed backup).

Make your choice then click "Continue"...

That happens quickly, but now you have to stream everything back onto the device. Every app, every photo, every song, every video. It might take a while...

Once it is completed, however, congrats, you've just upgraded your iPhone to the latest beta release of iOS and are ready to continue developing your app and testing out the features. Do remember, btw, that you're not supposed to share beta features with people (or news outlets) that aren't part of the Apple Developer Program. :-)