Is it possible to update an iOS device to a version older than the current version? My question title probably sounds confusing, so allow me to explain...

Let's say you have an iPhone 3GS that's still running iOS 5. Is it possible, today, to upgrade that device to iOS 6 (the latest supported version)? Or is it now stuck on iOS 5 because the latest version, iOS 7, doesn't support the 3GS?

Put another way, if you were to go to Software Update on that device, would it offer you an update to iOS 6, or would it say nothing is available because iOS 7 isn't compatible?
To give a clear answer to the question that was asked, which is whether a device can be updated to the latest version of iOS it supports, even if that version of iOS is no longer current.

Yes, it is possible. Software Update, either on the device or via iTunes, will offer the latest version that is supported by your device.

I can't readily find an official reference for this but it is supported by numerous other answers to similar questions on this site.