I am new to DNN and I am a bit confused.  I know how to install a module, but how do I update a module that is currently in use?

Simply install the new version of the module just the same way that you install new modules. The new module will be installed over the existing one. If there are any SQL changes, those will be fixed, too.

Before installing on a production site, ALWAYS make a backup of the database and website directory. Also read any instructions of release notes that might come with the new module version. For example, if you update the core Reports module from an early version to the new one, you'll find that there are some manual steps to do, too. Usually, though, you just install.

I am having the same problem. I can't just update the same way that I install a module because the file isn't in the server yet. . . So, what I am confused about is that I have gone to the DNN website and downloaded the most recent RSS Newsfeed module. The module is zipped. Do I unzip it, and all subsidiary folders first before uploading. Do I only upload the *.dnn extension file? If so what do I do with the rest of the files. Please provide a more comprehensive answer if possible.

Thank you

I would recommend that you watch this tutorial:

How to install a module to DotNetNuke