Absolute Beginner's Guide to iPod and iTunes

If you chose the Automatically update selected playlists only option, the playlists you selected are updated on your iPod each time you connect it to your computer. To change the contents of your iPod's music library, change the contents of the playlists you have selected to update. When you connect the iPod to your computer, those playlists will be updated. For example, you can add songs to the selected playlists, remove songs from them, change a smart playlist's criteria, and so on. The next time you connect your iPod to your computer or activate the Update Songs command manually, the changes you made will be reflected on the iPod's version of those playlists.

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Every time you connect your iPod to your computer, the update will be performed. You will see the update information in the Information area of the iTunes window, and the iPod icon will flash red. When the process is complete, you will see the iPod update is complete message in the Information area, and the OK to disconnect message will be displayed on the iPod's screen. Then, it is safe to disconnect your iPod from your computer.