The better way to learn is by a concrete example. I update a site called “heyshuga” from Drupal 7.8 to 7.9. Here are the steps

  1. Download the latest version of drupal

$ wget $ tar -zxvf drupal-x.y.tar.gz

-or using drush-

$ drush dl drupal

  1. Copy the new files to the old directory

$ cp -R drupal-x.y/* drupal-x.y/.htaccess /path/to/your/installation

  1. Run the drupal update