Some more general information. There is also a distinction between:
- Operating System (Android) version updates (i.e. going from Android 14 to Android 15): Those are rare and very infrequent, but they change your phone’s look and feel a lot. They also allow for more devastating bugs, so, FOMO or not, it is prudent to not necessarily be among the first to install them, especially if you depend on your phone…
- Bug fixes, necessary when Fairphone released something which breaks phone functionality. It unfortunately happens more often than it should. Like for version updates some prudence is required, because the fix might create some new bugs. If possible wait a day or two and check the forum for feedback.
- Features updates, usually improving or fixing some included app. For instance, at some point Fairphone greatly improved the initially rather unimpressive camera of the FP4. Those are usually safe to install since they usually only concern a specific app or feature, meaning potential damage will be circumscribed.
- Security patches, which are created monthly by Google and patch the latest discovered loopholes for hacking a phone. Those should be installed ASAP, more so since Fairphone usually releases them long after Google has published them. They are usually safe, since made by Google (not that they can’t blunder too…).
Now in the first decades of Android phones updates were generally rare and #4 type patches didn’t exist yet. Most Manufacturers released (usually once, rarely twice) a general update which could contain all kind of things, mostly #1 and #2 kind of stuff.
Nowadays the (lack of) security of Android has become a major issue, and so the industry has separated the different categories of updates:
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Google releases patches for its “Google Play System” (monthly, but not at a fixed date), which you can find and (should) install in Settings/Security. They also release updates for their “Play Store” app, but this one will usually update itself without any interaction (key word “usually”…).
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The manufacturer (Fairphone in our case) on the other hand releases the previously mentioned updates of type 1-4, and usually separately nowadays (not in the old carry-all blob), because of their very different frequencies: Android updates are yearly, bug fixes and feature updates are “if/when needed/available”, and Security Patches are monthly. Fairphone is unfortunately still using the carry-all blob, which sometimes delays Security patches till some non-urgent feature update is finished.
So, to resume: In Settings/Security you will find indicators of available updates: One for the type 1-4 updates released by Fairphone (“System updates”), and another for the Google Play System update.
It’s indeed (AFAIK) a type 1 update, so it contains a whole new OS, among other things. You should install it, because not having it means you don’t have any of the Security patches from June 2023 on! 
If you want to know what exactly was in there, make a forum search with the update number and you’ll find the original thread announcing it.