Version numbers in npm follow a standard called "SemVer". This stands for "Semantic Version". The specification for this standard can be found at http://semver.org.
The tl;dr version is that for a version like this:
1.2.3
^ ^ ^
| | `-- Patch version. Update for every change.
| `---- Minor version. Update for API additions.
`------ Major version. Update for breaking API changes.