Version Code is an integer, this has to be incremental and is monitored internally by the Market, when you publish. No one gets to view this value, but the market will want you to increment it every time you update the App.
The Version number is actually a string and is viewable on the market, to give an idea of the version of the App that you have published and that someone has on the market.
For instance :
Initial App uploaded..
Code : 1
Number : 0.1
Update
Code : 2
Number 0.2
Minor update
Code : 3
Number 0.2.1
Update
Code : 4
Number 0.3
This is set in Project, Application Version. Sometimes it may be that you make the manifest file read only - for instance if you implement Admob advertising. Then you have to adjust these numbers yourself, manually.
HTH