Those are all good questions. It can be confusing. What Intel does it this Tick Tock method. (and I might have this reversed a little).
So I think a Tick method is where Intel develops new technology and is a New processor. The Tock method is where Intel takes the same technology but just shrinks the processor. its doing the same thing but might use less power because its smaller.
An i7 would probably always beat out an i3. More You probably can't buy a 1st generation i3 or i7, but you probably could still find a 3rd.
http://en.wikipedia.org/wiki/List_of_Intel_Core_i3_microprocessors