Windows Phone 8.1 Update 2 is the latest non-preview release of Microsoft's mobile OS, which made its debut this year on handsets like the Lumia 640 and Lumia 640 XL. Microsoft said in April that Update 2 - which is also known as General Distribution Release 2, or GDR2 - would make it to some, but not all, Windows Phone 8.1 handsets.
GDR2 is an incremental update that adds only a handful of new features to the OS, such as Bluetooth keyboard support and native MKV video playback. It also includes a better-organized Settings hub, and 'Reset Protection' features, complying with new anti-theft measures introduced for smartphones in the United States.
You can grab GDR2 on your AT&T Lumia 635 by going to Settings > phone update, but if it's not immediately available, don't panic; just give it a bit longer - updates like this often take a little while to reach all eligible devices.