Auto Update

I am trying to understand how this software auto update might be working.
There could be three steps in it
1) Check for the availability of new version
2) Download the latest version
3) Install the downloaded version of software

Next i am going to expand on how each step could be designed or implemented

Check for availability of new version

When the current version of the application is started it could do the following in a background thread 1) Read the current version all the component that could be updated in the software
2) Go the vendor software update web server and check for the availability of newer version
2.1) Only if the exiting software license supports free updates
3) If newers version ar available the goto step2 or do nothing

Download the latest version

Options
1) Update the software user about the availability of newer version by displaying a message box and request the user for a manual update
2) Update the software user about the availability of newer version by dispaying a message box and request the user to intiate the auto download
2.1) Perform the download in the background (HTTP or FTP)

If download is successfully completed then goto to step 3 or display the error message to the user and the user to try again later.

Install the downloaded version of software

Note: Technology should support installation of newer version when current version of the software is running.
Install the downloaded software and request the user to restart the software.

Not sure how much of the above understanding and ideas are correct?

References
http://stackoverflow.com/questions/4499656/how-do-i-architect-automatic-update-of-my-clients