I haven’t touchet managed solutions for quite some time, so importing a managed solution recently surprised me:)
This article is not explaining the differences in detail, but I wanted to make sure you knew there is a difference between upgrade and update. I don’t understand why Microsoft insist on recommented the way they do. I feel you need to know the project before this is a certainty.
Upgrade
New for me is the option of upgrading. If you remove an item in the source managed file, this will now actually delete it in the destination. Say you remove a field on account this should remove the field in the destination.
Do you remember the old ways of doing it?
Introduced arround 2011 OR Introduced arround 2015
Stage for Upgrade
A great way to test something before committing to any changes. I would not use this for an ISV solution, but if you happen to use Managed internally this might be a way to go.
Update
This is marked as the Not Recomended option, but I still feel this is the normal way to do. If you are doing an ISV import this doesn’t matter because the solution file probably is correct, but if you are working with managed internally, I would use this just because I might not trust someone in dev doing config 100% correctly…
Source
Microsoft DOC