Do app updates overwrite previous version

Am I right in assuming that an update of an app when downloaded by the user will replace the previous version? So the new version must contain all the content of the old version plus any changes? I am looking at ways of ways of updating/unlocking content besides in-app purchase - is that possible?
Thanks,
Greg

And to elaborate a bit, the question relates to publishing a game which contains the full content of the game, but only parts of it are playable after the initial download. Later on an update would be released on the app store which unlocks the existing content. Since the app may have a large size, it would be ideal to have the update only function as something that unlocks the existing content already in the app.
I do realize that this is what in-app purchasing is intended to do, but the question came to me from the game's producers and so I just want to make sure I'm not missing some possible updating technique.
Thanks again.

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