T-Mobile has told us that the firmware update for G1 android will be done using Automatic Over The Air update. But for impatient G1 phone user, there is a way to update the android firmware manually. You need to download the latest version of android here, copy it over to a MicroSD card and execute it on your G1 phone.
However T-Mobile also warns that the manual upgrade isn’t officially supported and it may void the guarantee if your phone broken because of this manual firmware update. So far there is no problem reported on android user forum regarding this manual firmware update.