can automatic update work when app is not installed from android marketplace? or how can i auto update an app that is not installed via 
android marketplace. it is useful in scenario where many of our customer uses custom built of android device ( which not yet registered to android ) , and we want to make sure that changes to our app propogate to device ?
This sounds like it might be better asked on stackoverflow.

The autoupdate is a feature of the market. If users haven't installed the app with the market you'll have to implement your own update feature. In Android 2.2 you could potentially take advantage of the push notification system for updates.