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The Android OS has a number of different versions over the years. Android uses dessert names to name their versions (in addition to a numbered version). Here is a summary of the different versions:
Cupcake -- 1.5
Doughnut -- 1.6
Eclair -- 2.0, 2.1
Froyo -- 2.2
Gingerbread -- 2.3.x
Unlike a PC where if you are on Vista, you can obtain Windows 7 and install it, Android phones are not exactly upgraded like that. Generally, when a newer version of the OS is available, the manufacturer and/or carrier has to tweak it to work on the particular phone. Then that version becomes available and you can get the update pushed to your phone and then you can install it. Not all phones will support all new versions of the OS. It depends on whether the manufacturer/carrier decides to spend time on making it work. Sometimes for older phones, the manufacturer does not bother in which case you cannot upgrade.
You should be able to check the version on your phone in your settings. It will most likely show the version number like 2.1 instead of the name like Eclair. The reason is that there are sub-version numbers depending on your phone like 2.1.1, 2.1.2, etc.
Hope this helps.