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Apple has released iOS 14.7.1 and iPadOS 14.7.1 with bug fixes including one that prevented the Apple Watch from being unlocked when connected to Touch ID phones.
The new releases will automatically download to devices, or can be installed manually by visiting the Settings app. Select "General" then "Software Update" to start the update right away.
Update: Apple confirms the update fixes a security vulnerability that may have been exploited in the wild.