Google has recently launched android 4.0 and it is no doubt one of the best updates so far. For more details about Android 4.0, see here. To update your android sdk to version 4.0 on Windows, browse to your android installation directory (C:/Program Files (x86)/Android by default on 64bit Windows). Start SDK Manager.exe as an administrator (from the right click menu). It should then automatically search for updates and ask you for installation. Begin the installation. So far so good.
Now, something strange happens: "the latest update failed to install because it couldn't rename the tools folder in android-sdk-windows". You might give it a try by trying to restart the update after quitting windows explorer and disabling your antivirus software for a while. But it didn't work for me and might not work for you as well. The problem here was that the SDK Manager itself was using the directory and therefore wasn't able to delete it and replace it with a new one. Here's a work around for the problem that worked for me:
Solution:

  1. Make a copy of the tools folder itself (keeping it at the same directory tree level, thus "tools" and "tools-copy" were both in the "android-sdk-windows" folder).
  2. Run Android.bat from that copy (I recommend running it as an administrator)
  3. Re-run the update (it should now update the original, not-being-used-at-the-moment tools folder, among whatever other items it needed to).
  4. Close the SDK, delete the folder that you built in first step (Optional) (You might need to kill the adb.exe process first - not sure why that always persists but you can't delete the folder without doing that).
  5. Restart the SDK from the normal (now-updated) tools folder.

Now you can work with the updated sdk just like you did with the old one. For a good tutorial on how to start developing apps, visit here.

You might also run into a problem when you now run eclipse for developing android applications. The error that I received was this:

This Android SDK requires Android Developer Toolkit version 14.0.0 or above. Current version is 12.0.0.v201106281929-138431. Please update ADT to the latest version.

To solve this problem:

  1. Go to Help → Install New Software.
  2. On Work with: type https://dl-ssl.google.com/android/eclipse/ and press ENTER.
  3. Wait for Eclipse to fetch the repository. An item named Developer tools will appear in the list. Mark it for install, press Next and follow the steps to install the ADT tools.
  4. When finished, it will ask to restart Eclipse. Make sure you do this.
  5. When Eclipse restarts, all your Android SDK packages should show up again.