Yes, if you upload new files with the same names, they'll override the old ones. People who access itch.io via the website will be notified if they follow you, so they can get the new version. Dunno about the app.
The app updates automatically to the newest version. Users are somewhat notified in the sense that the `Downloads` tab opens up in the background and if you navigate to it you'll see that a game was recently updated :)
We recommend using https://itch.io/docs/butler/ to upload all game builds. It allows users of the app to download small patches instead of re-downloading the full game. And it lets you push updates faster, since it only uploads what changed since the last build!
It's a command-line tool, which some folks don't want to get into, but I promise it's really easy to set up and get your first push going, and I'm planning on integrating into the app so you can just drag & drop folders to push a new version :)