A version represents a state of your function's code and configuration in time. By default, each Lambda function has the $LATEST version pointing to the latest changes of your function, as shown in the following screenshot:
In order to create a new version from the $LATEST version, click on Actions and Publish new version. Let's call it 1.0.0, as shown in the next screenshot:
The new version will be created with an ID=1 (incremental). Note the ARN Lambda function at the top of the window in the following screenshot; it has the version ...