Env troubles? - python --version, conda list python and conda update python

as you can see here I made and env called Test3P310 then activated it
(base) D:\anaconda3>conda activate Test3P310

after confirming the env Python version level…
(Test3P310) D:\anaconda3>python --version
Python 3.10.9

Then i ran the command as shown below…
(Test3P310) D:\anaconda3>conda list python
Name Version Build Channel
python 3.10.11 h4de0772_0_cpython conda-forge

I am new to this so even though the version level was really insignificant I wanted to try and sync up the to version and ran this command
(Test3P310) D:\anaconda3>conda update python

well that updated the python 3.10.11 shown above to python 3.11.4. Is that how it is suppose to work? and what effect if any will it have on my libraries and packages I have installed or plan to install? BTW I am running Windows 11 Pro, Anaconda3. Any thoughts, help, ideas or just some clarifications ?

Yes, this is working as expected. You have python installed on your machine, but it is not associated with a conda environment. When you run ‘conda update’ it will only update the version of python installed in the current conda environment - it is also possible to have multiple versions of python installed in separate conda environments.