The update process will affect all files and folders in your wordpress and your previous changes may lost or it may reset all work . Its always recomended to have backup your wordpress before you start updating.

Automatic Background Updates:

Wordpress 3.7+ has facility which automatically update the minor changes and security update.

One-click Update:
Current version has facility ,we have the update button on it and we can click on it and update our files whenever we want to update wordpress.

Manual Updates:
We can manually update wordpress by
1. Download latest version of wordpress and unzip it.
2. Deactivate all the current plugins running.
3. Delete old wp-inclues and wp-admin directories,Do not make any changes in wp-content folder.
4. upload new version of wp-admin and wp-inclues directories from FTP,just overwrite existing files or folder,do not delete anything.
5. Upload all new loose files from the root directory of the new version to your existing wordpress root directory.
6. Delete the file .maintenance from your WordPress directory using FTP. This will remove the “failed update” message.
7. Now try to login again ,if it ask for database updation then follow the link mentioned there ,and update your database.
8. At the end clear your cache,so changes will go live.