What is the Update?
When we perform an update, it involves making changes to software such as Nextcloud or an operating system is such a way that it doesn’t affect its core structure. That's why making changes to Nextcloud and switching from Nextcloud 16.0.1. to 16.0.2. is called update. So, most of the frequent changes made to your server and software, like bug fixes, security patches, etc. can be termed as an Update. An update is often small in size, and it might take a couple of minutes to perform one.
What is the Upgrade?
When a set of changes made to software are significant and substantial enough, we can call it an Upgrade. That’s why making a switch from Ubuntu 16.04 to Ubuntu 17.04 or Nextcloud from 16.0.1. to 17.0.0 would be called an upgrade, not update. An upgrade mostly includes important changes to the GUI and a variety of new features and options which are not in the existing version of a software or operating system.
The time required to install an update is quite less than an upgrade. Installing an upgrade is more complicated and tedious as the amount of data that needs to replaced or copied is quite large. The update usually doesn't involve any downtime.