Well, I discovered this problem during updating my wife's Sony Ericsson xperia X10 phone, from Android 2.1 to Android 2.3. Do not get confused with the 3.0.x.x numbering! The 3.0.x.x or something like that which appeared in the splash screen upon updating the phone's OS did not mean for the newer Android version. It's just the manufacturer's release code for the update purpose I think.
Sony Ericsson, via its PC Companion, did ask me to backup anything since all data & settings on the phone will be erased & installed with new settings. My SD card won't be affected. Reading guide here might help (for X10 users only).
Android version 2.1 is already came with a Backup and Restore app. Doing backup is easy, if you carefully follow the instruction in the guide.
QR code for the guides:
The problem is, I couldn't install Backup and Restore as mentioned in the guides after finishing the upgrade. So, after googling something, I found this working apk installer for Backup and Restore. It size was slightly bigger, 2.6MB compared to the one mentioned in the guide site, 2.2MB. Both files actually were downloadable, but the smaller one in my case couldn't be installed.
QR code for the workable Backup and Restore apk installer for my X10:
The QR code link can be opened via NeoReader. The download can be done from generic Android browser or downloadable browsers e.g. Opera Mini. The smaller-size installer can only be downloaded from generic Android browser only, but the installation failed.
Alhamdulillah. My installation is successful. The update process is ongoing during the posting of this entry.
Why QR code if you have a browser in you PC?
Yes, since PC / laptop is required to do the OS update, we can browse the link from the PC/laptop. But, the new Backup & Restore must be installed preferably from within your phone. Accessing the site in phone is easier by using QR code provided you have the correct QR code reader.