Depends. Admins used to make an entirely new world when major updates (like 1.5, 1.6, 1.7) came out. That seems to have changed now, as there's a world specifically for 1.7, but the 1.6 world has now been updated to 1.7. For smaller updates (1.7.1, 1.7.4, etc) the world will update and nothing will change.
Essentially whatever world something is created in, it can't leave that world unless there's another world on the same base version.
For example:
1.7 world works with a different 1.7 world.
1.7 world works with a 1.7.4 world.
1.6 world works with a 1.7 world AFTER the 1.6 world has been updated to 1.7.
1.6 world DOES NOT work with a 1.7 world.