An Apple "software upgrade" means a major, standalone version of a software product. Such products are usually something you purchase. They are shipped in a box or shrink-wrapped package. Mac OS upgrades are sometimes also called "reference releases."
For example, Mac OS X 10.5 and Mac OS X 10.4 were upgrade products. Are or were available from an Apple reseller, Apple Retail store, or the Apple Store Online.
A "software update" updates a major (reference release) version of software, but does not upgrade it to the next major version (if one exists). For example, you can download a web update to update Mac OS X 10.5 to Mac OS X 10.5.5, but you can't download an "update" to upgrade from Mac OS X 10.4 to 10.5 (because 10.5 is an major upgrade).
An update is generally smaller in size than an upgrade. An update is something you can download, unlike a software upgrade. It's wise to install the latest updates available for a software product. You can use an update only if there is a prior version of the software installed on your computer. Mac OS upgrades are sometimes also called "maintenance releases" or "dot releases".
For example, the Mac OS X 10.4.11 Update is a downloadable update for Mac OS X 10.4. Mac OS X 10.3.9 Update is a downloadable update for Mac OS X 10.3. You can't install the 10.4.11 update on top of Mac OS X 10.3, nor can you install the 10.3.9 update on an existing Mac OS X 10.4 installation.|
A software update is usually downloadable; a software upgrade usually is not.
A software upgrade usually increments the first "dot" number of a product (for example Mac OS X 10.5, Mac OS X 10.2, Mac OS 9); a downloadable software update usually increments second "dot" number (for example, Mac OS X 10.3.9, Mac OS X 10.5.5).