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Hi council,
Modules come with readme files that explain (some better than others) how to install or upgrade.
For most modules just uploading to the server overwriting the previous version and updating the module in the Modules Administration page is enough.
Others have upgrade scripts. These scripts are written to upgrade a certain version to a certain version. They are PHP files.
So for News 1.2.1 (the latest) from the builtin news here is what you want to do.
Uzip the xoops_news_1.2.1 archive on your local computer.
Open the folder until you see a folder named news.
Open that folder to make sure you see folders like Amin, class, includes and so on. Go up one level back to the news folder, this is what you want to upload.
Read the upgrade.txt in the folder root.
It explains to update your module normally then run a script to complete the upgrade.
If I did not give you enough information, reply back.