HT1353 how to upgrade the apple ipod touch OS, I have 32gb ipod touch 3rd generation(Model: A1318)

Also till which iOS version it can be enhanced???
Can it be upgraded through wifi connection or does it require the laptop connection???

The upgrade must go with iTunes. The first upgrade directly with the iDevice you can do when you have iOS5 or higher.
The maximum iOS on your iPod Touch is 5.1.1.
Thus: connect to iTunes, and start update: it will update in one step to 5.1.1.  My take some time, and then the iPod restarts, do not disconnect until the iPod touch is running with the new iOS.

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