.net 1.0 is a standalone "thing"
.net 2.0, 3.0, and 3.5, are all slight improvements over each one. They can coexist on a machine with 1.0, or 4.0, but they effectively replace each other when installed.
.net 4.0 is another standalone thing, latest version, can be installed side by side with 2/3, and 1.
A .net application is marked to require a particular version of the runtime, so if you need to run a .net 1.0 program, you'll need the 1.0 runtime, etc. Not many apps use the 1.0 runtime.
Usually, you'll be good installing 3.5 and 4.0. If you install 3.5 you should automatically get 2.0 and 3.0