Error applying patch with Git
Place op_update_should_be_create-2807275-2.patch into the module folder, in this case being the sites/all/modules/entity folder. 

Then in your terminal cd (change directory) into the module folder.

cd /var/www/drupal/sites/all/modules/entity

then

git apply -v op_update_should_be_create-2807275-2.patch

In the discussion, Fago has commited this patch (2 months ago), but into the 7.x-.1.x only.



So I assume you're trying to patch the stable version, 7.x-1.8.

If you use/download the latest dev (7.x-1.x-dev) version, it will already have the patch. 

Note: The rule of thumb, is to use the Stable version rather than the Dev version.