When you chose install, the Software Center will replace the current version with the newer version, i.e. upgrade to the newer version.
By just upgrading, you will be more likely to keep any custom settings you have. The only way I would uninstall first is if I thought I might have some bad settings that are stopping the program from running properly and wanted to do the quick and dirty fix instead of tracking down the incorrect setting.. However the only way to reliably wipe all you old settings it to run
apt-get purge {application name}
and to the final part of your question, this applies to just about any application I can think of. I have even upgraded my network manager while online and then continued to stay online(the old version continues to be used until the program is restarted, in the NM case that is reboot unless you force it to stop and start manually.