DreamHost presently has two major versions of PHP installed by default: PHP 4.4.7 and PHP 5.2.3. You can choose in the Control Panel which version of PHP your domain(s) will use, and you can have different versions set for different domains within your account.
That said, if you want to "upgrade" to a different version than either of those, you can install your won version of PHP as described in the DH Wiki (though this is considered by many to be somewhat challenging).
DreamHost allows you to do this, but will not offer support of any kind for such custome installations, so if you choose to install your own PHP, you are pretty much on your own (except for whatever help you can get here,m or from other "non-DreamHost" folks).
All that said, what version are you currently running, and what version are you being told you should be running?