Everyone be very very careful with this update!!!
In a nutshell it would seem Xiaomi activated some deviceID/ bount to Mi Account checking with this release. And if your device was owned by someone previously who had it registered with xiaomi prior to selling it to you, but forgot to deregister it before selling it to you, you will need his/her password to activate it.
Prior to giving the phone(Mi3W) to my wife I used the device and had it connected to my Mi Account. Obviously I did not deregister it with xiaomi.com, but simply wiped it clean and gave it directly to my wife. She has no Mi Account and had not registered it with xiaomi.com. For the past 3 months I kept updating it without an issue until today.
Once I rebooted from the update the phone only displayed "This device is lost" and that its bound to an existing Mi Account and someone will be contacting me shortly.
Since the partial ID I saw was the Xiaomi account id(which I thought was a phone number), the first thing that came to my mind was that someone hijacked my phone and holds it for ransom similar to the Linux mint website hack last week(where someone stole the website and uploaded compromised images of the distros). Immediately I logged into my Mi Account and by chance(URL at the top) found that my xiaomi ID was actually the one partially displayed on the phone. Then I input my password for my Mi Account and the device got activated.
So I got out with only a scare since I was the previous owner of the phone, but if you bought the device second hand and the previous owner did not deregister it prior to selling it to you(and you do not have it registered with Xiaomi), you might have problems with this release!