I just found this on Amazon:
It says which version is needed for each Kindle. the 3.4.2 is what is on mine.
So I am assuming it upgraded automatically that's why it was grayed out.
The following devices require the latest software version:
Device and Year
Software Version Your Device Needs
Update via Wireless (2G/3G) or Wi-Fi
Kindle 1st Generation (2007) 1.2.1 Use Wireless
Kindle 2nd Generation (2009) * 2.5.8 Use Wireless
Kindle DX 2nd Generation (2009) * 2.5.8 Use Wireless
Kindle Keyboard 3rd Generation (2010) ** 3.4.2 or higher Use Wi-Fi
Kindle 4th Generation (2011) 4.1.3 or higher Use Wi-Fi
Kindle 5th Generation (2012) 4.1.3 or higher Use Wi-Fi
Kindle Touch 4th Generation (2011) ** 5.3.7.3 or higher Use Wi-Fi
Kindle Paperwhite 5th Generation (2012) ** 5.6.1.1 or higher Use Wi-Fi
Kindle Paperwhite 6th Generation (2013) No Update Needed No Update Needed
Kindle 7th Generation (2014) No Update Needed No Update Needed
Kindle Voyage 7th Generation (2014) No Update Needed No Update Needed
Kindle Paperwhite 7th Generation (2015) No Update Needed No Update Needed
* For these devices, even if you are running software version 2.5.8, if you have not connected to wireless (2G/3G) since October 5, 2015, please connect now.
** For these devices, even if your device has built-in 3G, you will need to connect to Wi-Fi to receive the latest software update.
If you are not sure which Kindle e-reader you have, please consult Which Kindle E-reader do I have?
Update Your Kindle E-Reader via Wi-Fi
If your Kindle e-reader does not have the latest software version, connect your device to Wi-Fi to receive the software update.
To update your Kindle once connected to Wi-Fi:
1. From the Home screen of your Kindle, select Menu or tap the Menu icon, and then choose Sync and Check for Items.
2. Plug your Kindle in, and leave your Kindle plugged in and connected to a Wi-Fi network overnight.
While asleep, the software update will download and install automatically. Your device may restart multiple times during the update process.
You will get a final confirmation letter titled 03-2016 Successful Update on your device when the update is complete. You can find the letter on your device by viewing all items in your Kindle Library, and then sorting the items by Recent.
If you’re not sure if your device has the latest version, go to Determine Your Kindle E-Reader Software Version.
Update Your Kindle E-Reader via Wireless
If your Kindle (1st Generation) does not have the latest software version, ensure your device is connected wirelessly, and then sync your Kindle. If your Kindle (2nd Generation) or Kindle DX (2nd Generation) does not have the latest software version, or if you have not connected to wireless (2G/3G) since October 5, 2015, ensure your device is connected wirelessly, and then sync your Kindle.
To sync your Kindle: • Kindle (1st Generation)
1. Move the wireless switch on the back of your Kindle to the ON position.
2. From the Home screen of your Kindle, select Menu, and then choose Check for New Items.
3. Plug your Kindle in, and leave your Kindle plugged in and connected to its wireless network overnight.
• Kindle (2nd Generation) or Kindle DX (2nd Generation)
1. From the Home screen of your Kindle, press the Menu button.
2. Select Turn Wireless On with the 5-way controller.
3. Press the Menu button again and select Sync & Check for Items.
4. Plug your Kindle in, and leave your Kindle plugged in and connected to its wireless network overnight.
While asleep, the software update will download and install automatically. Your device may restart multiple times during the update process.
You will get a final confirmation letter titled 03-2016 Successful Update on your device when the update is complete. You can find the letter on your device by viewing all items in your Kindle Library, and then sorting the items by Recent.
If you’re not sure if your device has the latest version, go to Determine Your Kindle E-Reader Software Version.
Deregister Your Kindle E-Reader if You No Longer Have It
If you no longer have your Kindle e-reader, you can deregister the device from Manage Your Content and Devices.
To deregister your device:
1. Go to Manage Your Content and Devices.
2. Select the Your Devices tab, choose the device you want to deregister, and then click Deregister.
3. Click Deregister again to confirm.
Determine Your Kindle E-Reader Software Version
To determine if you need to update your software, check the current software version on your device:
• Determine Your Kindle (1st Generation) Software Version
• Determine Your Kindle (2nd Generation) Software Version
• Determine Your Kindle DX (2nd Generation) Software Version
• Determine Your Kindle Keyboard (3rd Generation) Software Version
• Determine Your Kindle Touch (4th Generation) Software Version
• Determine Your Kindle (5th Generation) Software Version
• Determine Your Kindle Paperwhite (5th Generation) Software Version