Rename the downloaded data file to update.zip
Copy the data file to your microSD card.
Turn off your Nexus One.
Turn on your Nexus One when holding down the Volume Button
From the screen that pops up, roll down to recovery and push the Power button.
Wait for the triangle with an exclaiming symbol to appear. Once the symbol shows, press the Power and Volume Up button at the same time.
Select the Apply sdcard update.zip from the menu that pops.
Take a rest untill installation from sdcard complete. Now reboot system and your device as well.