When restoring or upgrading any jailbroken device, it should be done on a computer. After restoring or upgrading, you'll lose your jailbreak, meaning you'll have to rejailbreak once you've upgraded/restored your device. You'll have to plug it into your computer, DFU mode the iPhone and restore using iTunes.
You don't have to upgrade your iOS. Like Android, upgrades are voluntary, though I'd say Android OS upgrades provide more than iOS upgrades since there're actual fixes on Android OS's and little to no bugs upon upgrading compared to iOS. My recommendation is to just stick with an iOS until another really attractive one comes out. I have 3 4S's, 2 of which are still on iOS 5.1.1, and my latter one is on the latest iOS since it's developer cracked, so I don't exactly have to care what iOS is on it, I'll still be able to run my developer stuff. I've yet to be attracted by iOS 6 because of all the bugs that's being dished out. Hopefully iOS 6.1.3 or 6.2.1 become a golden release with an untethered jailbreak like iOS 5.0.1 or 5.1.1. Maybe then I'll upgrade to iOS 6