You should select an iPod forums for that question. This forum is for Mountain Lion, the Mac Operating System.
To update an iPod, connect it to your computer via USB cable, then select it in iTunes. There is a button there to check for updates.
There is an iPod Users guide in the iTunes Help menu.
Depending on the version of iPod, you can update the software right on the device (from the iPod User's Guide):
Software Update lets you download and install iOS updates from Apple. Update to the latest iOS version: Go to Settings > General > Software Update.
If a newer version of iOS is available, follow the onscreen instructions to download and install it.
I suspect you have a 2G iPod. Those can only go to iOS 4.2.1.
iPod touch (3rd generation)
iPod touch (3rd generation) features a 3.5-inch (diagonal) widescreen multi-touch display and 32 GB or 64 GB flash drive. You can browse the web with Safari and watch YouTube videos with Wi-Fi. You can also search, preview, and buy songs from the iTunes Wi-Fi Music Store on iPod touch.
The iPod touch (3rd generation) can be distinguished from iPod touch (2nd generation) by looking at the back of the device. In the text below the engraving, look for the model number. iPod touch (2nd generation) is model A1288, and iPod touch (3rd generation) is model A1318.