Typically, it would use the one in /boot. The one in /etc is probably a symlink.
edited to add: Any kernel that gets upgraded by your package manager is almost definitely very stable & thoroughly tested. The only problem with upgrading may be related to some drivers that were compiled against the old kernel & did not come from the package manager (like Nvidia graphics card or a RAID controller, etc.).
Last edited by BrianK; 10-29-2008 at 06:34 PM.