Unless you do not have an active internet connection, upgrade OTA using the Application Manager. If you do not see the update after hitting "update" simply reboot and behold the blinking update icon.

Perform a back up before proceeding. If there is not enough memory hit details when the application manager reports that.
This will give you the information you need.

An OTA upgrade preserved all my settings and applications and I had no need to use the back-up. However, if "Details" does indicate that you need to remove applications to free up space for the upgrade, you can simply restore them from this back up once the upgrade to PR 3.1 has been completed.