What's the difference?
This is a question that is often asked and sometimes misunderstood.
I will attempt to make this nice and clear so that you can be aware of what happens when you are asked to restart and faced with the 'configuring Windows' screen on restart.
Update:
These are typically released monthly and provide provide updates and security fixes for your installed Windows programs/apps. These are generally quite quick and painless and even reboot times are often not that long.
Upgrade:
Now currently twice a year with Windows 10 - spring and autumn - and are effectively complete 'new' operating systems (i.e. new versions of Windows). Currently the spring release is the major upgrade with the autumn release somewhat smaller and almost just a refinement of the previous release. With the upgrade there can be new features/programs/apps but at the same time some may be removed or changed. There can often be obvious visual changes but a lot more goes on 'behind the scenes'. Reboot times can often be very long with all the extra configuration and as such never a good idea to restart if you have things to do on your computer.
Should you update/upgrade?
In simple terms 'yes' because that way you will be running the most current version of Windows and hence have all the latest apps/programs, increased stability and security features etc. Compatibility with other newly released hardware/software should also be improved. Outdated versions get dropped from Microsoft support for being 'too old'. Since the release of Windows 10 much of this is now taken out of your hands and you have little control over these updates/upgrades as they should happen automatically. This is generally a good thing as it keeps your computer up to date (previously many people chose to ignore or never install updates leading to all sorts of issues). With this said, it is therefore not really recommended that you go 'hunting' for updates or try and force them, unless you know what you are doing - best let Windows deal with it. Having Window running the latest version should also make the next release install more smoothly.
Occasionally the updates/upgrades will fail or never attempt to install and there could be several reasons - some good, some bad. If your current system is not compatible (e.g. too old) then - quite rightly - upgrades may not even attempt as this could lead to a failed install and a failed computer. Other reasons may be poor internet connections, computers not a actually being used for long enough or even just going to sleep or some other computer issue - and quite possibly - some kind of virus or malicious activity preventing the install.
And so...
Hopefully now you are a little clearer and have a little more understanding about what your computer does to keep itself working. Windows these days does a pretty good of looking after itself and the updates and upgrades don't cause too much of an issue (other than time and inconvenience), although when things do go wrong they can be catastrophic and lead to data loss (yes, it does happen).
Just because your computer's up to date doesn't mean it's trouble free!
Even though you may have the latest releases don't be complacent, things can still be/go wrong. You still need to ensure that you do your best to ensure you have virus protection and beware of dodgy emails, websites, downloads etc. Unfortunately there is much out there that can reek havoc and slow down your computer as well as malicious activity that is designed to steal your data and cause privacy issues - much of it can be hidden, not always obvious and can even by-pass antivirus programs - so be aware.