You don't update, you upgrade.
Software update, upgrade--what's the difference? - http://support.apple.com/kb/HT1444 [No longer directs to a document discussing this but basically an upgrade is a major system release such as replacing OS 10.4 with 10.5, and an update is a minor release for a particular system, such as taking 10.4.8 to 10.4.11. Software Update will check for updates but not necessarily for upgrades, particularly if a newer system will not run on an older piece of hardware.]
Upgrades require a major download of the appropriate installer from the Mac App Store (if you want 10.8 you have to pay for it). I don't know if you have to install any intermediate OSX versions. Lion to High Sierra would be a very large jump so make sure all your other software can handle it. You may find a lot of old things break. You may need to go to El Capitan first, but I don't really know. You may wish to.
If your Mac is not Compatible with Sierra but you Have Not Upgraded to El Capitan - https://discussions.apple.com/docs/DOC-10692