Android - What does FOTA mean

FOTA - Firmware Over-the-Air

This is the update sent to the OS via your service provider(for 3G/GPRS/EDGE..) or Wifi.

It will download an image of the new firmware from the server and install it after you accept.

From Wikipedia,

FOTA is an acronym for Firmware Over-the-Air. It is used for upgrades to mobile phones and PDAs.