I went with the combo that software update offered; so when I went from 10.6.3 to 10.6.6, the update also installed 10.6.4, & 10.6.5, the 2 updates before as well?
Yes. Regardless of what update method you use, you cannot get to 10.6.6 without getting the intervening updates. If you somehow managed to come up with the 10.6.5 to 10.6.6 delta updater, and tried to install it on a 10.6.3 system, it would refuse to run.
I have heard that 10.6.7 will coming out soon, should I let software update find it & just install what it offers, as I said I am a bit new to mac os, so I assume the updater knows what it is doing. also, is it best to hold off on a new update for a short while to see if there are any bugs? what if it does not offer a combo updater but just 10.6.7?
As said, for 99% of Mac users just running Software Update and letting it install whatever it finds is perfectly fine. Software Update will almost always offer you the delta updater--it's a MUCH smaller download--but that's not an issue. As an IT person, I wait a few days before installing 10.6.x updates at work, just to be safe, but I can only think of a couple of times there was ever a significant issue with a MacOS update of the sort, and in the event there is, Apple will release a patch (or a re-updater, in one case) to fix it.
The advantage of the combo updater is that applying it will sometimes fix all sorts of odd issues with the OS itself that other methods will not - so I recommend downloading it regardless, and keeping it around in case you ever need it.
Keep in mind here that "sometimes" is probably much less than 0.1% of the time--again, literally millions of people run Software Update without knowing or caring what a combo updater is, and almost all their computers run fine.
The only time you'd want to actively seek out the combo updater is if something specific is not working right after doing an update, which is pretty rare. And while it's true that the MacOS doesn't have any sort of rollback feature like Windows, you can always re-install the most recent combo updater as a troubleshooting measure if you really are having issues--that'll have the same effect as if you'd installed it to begin with.
Note, incidentally, that on the off chance you have some kind of major problem and need to reinstall the OS (exceedingly rare--I haven't needed to do that in years for any of the systems I admin, which is a far cry from the Windows boxes I care for) it is usually a MUCH smoother process than Windows. You rarely if ever have to reinstall any software, and its only real disadvantage is that it takes a couple of hours.
The bottom line, though, is not to get too worked up about problems you're not even having. The MacOS is generally stable, and its automatic update mechanism works well. If you do nothing but install whatever Software Update suggests when it suggests it, your system will almost certainly run just fine, and there's no need to worry about it unless something actually does go wrong, at which point you've got forums like these to ask for advice. (Aside: also keep in mind that this is a troubleshooting forum, so of COURSE you're going to see a lot of people asking about issues. If you take the number of posts here or on the Apple forums versus the number of Macs in active service, you'll get a very, very small percentage.)