Update it from iTunes on a computer as described at the bottom of this article; devices running an iOS version prior to 5.0 can't be updated straight from the device. It will be updated to the latest compatible version.
You posted in the OS 10.3 (pre year 2000) forum instead of the iPhone forum. To get answers to your question, next time post in the proper forum. See https://discussions.apple.com/index.jspa I'll request that Apple relocate your post.