For the time being, this update is 100% optional. You will still have access to all previous features. You do not have to update.
Source: Playstation BlogEarlier tonight we released an optional system software update (v3.65) for PlayStation 3. This new firmware improves the operating stability of some PS3 format software, and changes the XMB item SaveData Utility (minis) to [SaveData Utility(minis/PSP)].
Again, this update is optional, and can be downloaded by selecting System Update from the Setting column of the XMB.
More information right here: PSX-SCENE (PS3 System Software Update (v3.65))Find out what features are included in PS3 system software update 3.65.
Main features in system software update version 3.65
- Saved Data Utility for PSP™ games
[Saved Data Utility (minis)] under [Game] has been changed to [Saved Data Utility (minis/PSP™)].
You can now back up saved data for PSP™ games by copying it to the PlayStation®3 Hard Disk Drive.
Other new or revised features in version 3.65
System stability during use of some PS3 software has been improved.
via: PSGroove - Official 3.65 PS3 Firmware Released