update If run without any packages, update will update every currently installed package.
If one or more packages or package globs are specified, Yum will only update the listed packages.
update operates on groups, files, provides and filelists just like the "install" command.
If the main obsoletes configure option is true (default) or the --obsoletes flag is present yum will include package obsoletes in its calculations - this makes it better for distro-version changes, for example: upgrading from somelinux 8.0 to somelinux 9.
upgrade Is the same as the update command with the --obsoletes flag set.