Incremental Patcher.

Yes, software like this does exist, even if it's really no "incremental" patching.

The problem is that the user has to install all previous patches to apply the current one. Using packages that can patch any known version of a file to the current version are mostly much bigger than the current version would be as "full" file. (i.e. to update to version 1.06, the user would have to run updates 1.00->1.01, 1.01->1.02, 1.02->1.03, 1.03->1.04, 1.04->1.05, 1.05->1.06 in this order; a single package containing all six updates would most likely be bigger than the complete version 1.06)

And when you talk about updating EXE files: The file must be uncompressed and unencrypted or the patch will be as big a the full file since everything has changed between the two versions.

I know "RTPatch Pro" as standalone application for this type of patches. (it has been used by many well known companies like "Microsoft" or "E.A. Games")

The "WISE" Installation system also allows creation of this patches. (maybe "InstallShield" also supports it, but I'm not sure about it)

The Windows Installer (MSI) packages support this kind of patches also by definition. But you usually use other software for the Setup creation, so patching support depends on the software you use to build MSI installers.