Yes you can upgrade as long as the upgrade is available for your phone. Mostly the changes are making the OS faster and more effecient, and occasionally additional features.
Android 3.x are Tablet OS incompatible with Android Phones
You can upgrade to 4.0.x only if your manufacturer is going to provide an upgrade or your phone has strong dev community and you are going to risk voiding the warranty.
Technically All 2.3 phones should be compatible with 4.0 but You need atleast V7 processor phone and a decent GPU so that the upgrade is workable and smooth .
most phones / devices get only 1 to 2 upgrades "officially" . that is given to you by the carrier and/or OEM within the products life cycle (about 1.5 to 2 yrs).
if you Root it and if the development community is active for that device... they can keep the upgrades coming. Example: HTC Hero; they are working on ICS for it now.
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