Get the right update package from the sourceforge file repository
Overwrite files in XOOPS directory on your server with the content of /htdocs * make sure that you copy the content of /xoops_lib to whatever directory you keep it on the server now (it should be your current XOOPS_TRUST_PATH directory), then delete the /xoops_lib directory. There can NOT be two directories with the content of /xoops_lib
Update the "System" module from the modules administration interface. Other modules, especially "Profile", "PM", and "Protector" are recommended to update as well