Managed package upgrades and versioning
Key Takeaway
An org can only have one version of a package installed at any time, and downgrades are not supported. A subscriber on an older version can get a bug fix through a patch version, without moving to a new major version.
A managed package is a container that a developer uses to distribute an app's metadata to other Salesforce orgs. Each time the developer changes the package, they create a new numbered package version. Orgs that already have the package, called subscriber orgs, move to that version through an upgrade. The version rules decide what changes in the subscriber org and what stays.
Package install and package upgrade
A package holds an app's metadata, such as custom objects, Apex classes and Lightning pages. Installing a package really means installing one specific package version. Each version is an unchangeable snapshot of the metadata at one point in time.
A package install is the first time any version of a package goes into an org. A package upgrade installs a newer version into an org that already has an earlier version. An upgrade can add new metadata, change existing metadata, or delete or deprecate metadata.
An org can only have one version of a package installed at any time, so an upgrade replaces the earlier version rather than running beside it. Downgrades are not supported. For example, a subscriber can upgrade from 1.3.0 to 1.3.2, but cannot install 1.3.0 on top of 1.3.2.