You'll need to upgrade to OS X 10.6 before you can update to either Lion or Mountain Lion. Call your online Apple store at 133-622 to order it. You'll need at least 1GB of memory to install it.
After you install it and do Software Updates, you'll be at OS X 10.6.8. If you want to upgrade to OS X 10.7 Lion, a call to your online Apple store is in order again, and they'll send you a code to download Lion from the App store.
If you want to install the current OS X 10.8 Mountain Lion, you can do that directly from the App store. You can upgrade from OS X 10.6 directly to OS X 10.8, you don't need to install OS X 10.7 in that case.
Either Lion or Mountain Lion have a minimum memory requirement of 2GB, with 4GB recommended. Your MacBook needs to be a late 2008 aluminum or 2009 or newer model to run Mountain Lion.
Start by checking if you can run Snow Leopard:
Requirements for OS X 10.6 'Snow Leopard'
OS 10.6 Snow Leopard is once again available from the Apple Store:
and in the UK:
but nobody knows for how long it will be available.
To use iCloud you have to upgrade at least to Lion, but some functions are only available in Mountain Lion:
You can also purchase the code to use to download Lion (Lion requires an Intel-based Mac with a Core 2 Duo, i3, i5, i7 or Xeon processor and 2GB of RAM, running the latest version of Snow Leopard), or you can purchase Mountain Lion from the App Store - if you can run that:
When you have installed it, run Software Update to download and install the latest updates for Snow Leopard.