What is the Region Dropdown Override?
The Region Dropdown Override is for the post-checkout step. If an address fails verification in this step, the administrator can choose to allow the customer to type the region into a textbox at this point with this option. This is useful in case the user needs to type in his region because it doesn't appear in the dropdown.
How do I update the plugin?
From the Admin Panel, go to System -> Magento Connect -> Magento Connect Manager. Next to the Manage Existing Extensions bar, click the 'Check For Upgrades' button. If there is an update available, 'Crafty_Clicks_MelissaData_Address_Entry' will be highlighted in yellow. You may then update the plugin to the desired version (which will almost always be the latest) with the dropdown and 'Commit Changes'.