• cd /usr/local
• git status
• Discard all the changes (unless you actually want to try to commit to Homebrew - you probably don't)
• git status til it's clean
• brew update

The right way to solve this is to enter:

$ cd "$(brew --repo)" && git fetch && git reset --hard origin/master && brew update

Found at http://discourse.brew.sh/t/how-to-upgrade-brew-stuck-on-0-9-9/33.

Just prefix your install command with HOMEBREW_NO_AUTO_UPDATE=1, like this:

HOMEBREW_NO_AUTO_UPDATE=1 brew install somepackage

Source: brew manpage