auto upgrading

My wordpress keeps informing me I can upgrade to 2.9.2
WordPress 2.9.2 is available! Please update now.

So I went through and did this easily on my local WAMP no problems. Now I want to do the same on my live server. I hit the link and chose ‘automatically update’ since this worked on my WAMP ??

It automatically puts in ‘localhost’ and my username … when I go to put in the matching password for this username I get told that it is wrong. I assume its wanting to connect through my ftp program (filezilla) to connect to my server but if this is correct why is it automatically putting in my database username for phpmyadmin?

A little clarity on which its needs to connect to would be nice ??