how can i update my 3.1.3 (7E18 Version ) iphone 8GB to latest IOS

If your iDevice is using a version of iOS lower than 5, you will need to use iTunes on your syncing computer to perform the upgrade. Use the Apple link below as a guide for the upgrade.

http://support.apple.com/kb/HT4972

Also read the instructions from the section entitled "Update your device using iTunes" at the link below.

http://support.apple.com/kb/HT4623

Information regarding transferring purchases from your iDevice to iTunes on your syncing computer can be found at the link below.

http://support.apple.com/kb/ht1848

Your model of iPhone will determine which will be the maximum version of iOS.

First check what model of ipod it is.

use this link to check:

https://selfsolve.apple.com/agreementWarrantyDynamic.do

Then check what models are compatible with the operating system you are trying to update to

for ios 4 use this link:

iPod touch: Which iOS 4 software features does my iPod touch support?

(this one shows system requirements at the top. The rest have a system requirements section.)

ios 5:

iOS 5 Software Update v1.0

ios6:

iOS 6 Software Update

ios 7:

https://www.apple.com/ios/features/

If your device generation is not listed on the page for the operating system you will not be able to updat to it. Stedman has already posted links for the appropriate articles for updating if your device is compatible. Also the operating system takes up memory space so you'll need to make sure you have enough space for the update as well.