I was refreshing my Eclipse development environment and Android SDK. While updating the Android SDK I noted that I only had version 3.5 (Galileo) of Eclipse and the new SDK would not work.
Thanks to this article - How To Update Eclipse From Galileo (3.5) To Helios (3.6) In-Place Without Reinstalling - it was relatively easy to update to 3.7. The tips in the previously-mentioned article are not even necessary. I just added Indigo software repository as recommended on Eclipse wiki and after that I found many 3.7 and Indigo repositories already added but disabled. All I had to do is enable those repositories and the software upgrades were available.
To update Android tools, run SDK Manager and update the platform tools and SDK from there first. Then add the latest Eclipse repository, for example I copied Google repository from "http://dl.google.com/eclipse/plugin/3.5" into a new one