How exactly does the new Apple update work?

I have a 12 GB IPhone 6 plus.

I'd like the IOS 9 update but it needs 1.2 GB. I don't want to update because I don't want to risk the space.

Someone told me that when the phone updates it erases the old version then adds the new version, is that correct? If that's the case is it worth updating then?

You gain space with iOS 9 because previous OS was 4 GB is size, and iOS 9 they shrunk to 1.3 GB… Which is pretty incredible they were able to make it 25%.