When updating an app, is it newly installed or only part of it updated? While updating an application, is the application newly installed, or only updated-part added to previous application?

Is it possible to download only updated part of the application?
This is called "delta update" and Google already does this on Play Store.


  These delta upgrades, which save time and bandwidth when updating larger apps by only downloading the actual changes (rather than the entire program), [...]


Emphasis mine.

Basically, instead of downloading the whole package, Play Store will instead only download and apply part of the code that are changed. In the video demonstration on the site, you can see the difference between updating OfficeSuite (whole app) and SwiftKey (only a small part).