Update using FTP
Please note: make a backup of the theme prior to updating.
The theme is located in wp-content/themes/yourtheme.
Go to your account, and download latest version of the theme. The theme is located inside the downloaded zip in “Theme files” folder.
Unzip the theme zip file (yourtheme.zip) into wp-content/themes/ folder. Make sure this folder is named “yourtheme” (replace with old).
It seems scary but you really won’t loose any of your data. The only exception is if you have made edits to parent theme files like header.php, footer.php etc. These changes will need to made again to the new files. But all of your content and theme settings are preserved.
Update using Easy Theme Update plugin:
You may want to use a plugin to automate backing up your current theme and uploading the new version: http://wordpress.org/extend/plugins/easy-theme-and-plugin-upgrades/