It is highly recommended to maintain a separate directory for each release. This not only avoids mismatch between versions, (files may have been added or removed) but also provides an easy path to downgrade your installation, should you need to.
The usual command is (1 step):
tar -xzf filename.tar.gz
OR (2 steps):
gunzip filename.tar.gz
tar -xf filename.tar
Other file archiving tools such as
7-Zip should also be able to handle decompression of the archive.