Difference between Apt-get 'update' and Apt-get 'upgrade'

For some reason, I was confused between which option was better to ensure you receive all the latest and greatest updates to your Ubuntu related distros specifically Backtrack.

So I did some digging and came across this site to pull the following info:

'Apt-get update'

update

Used to re-synchronize the package index files from their sources. The indexes of available packages are fetched from the location(s) specified in /etc/apt/sources.list (5). An update should always be performed before an upgrade or dist-upgrade. 

'Apt-get upgrade'

upgrade

Used to install the newest versions of all packages currently installed on the system from the sources enumerated in /etc/apt/sources.list (5). Packages currently installed with new versions available are retrieved and upgraded; under no circumstances are currently installed packages removed, nor are packages that are not already installed retrieved and installed. New versions of currently installed packages that cannot be upgraded without changing the install status of another package will be left at their current version. An update must be performed first so that apt-get knows that new versions of packages are available. 

'Apt-get dist-upgrade'

dist-upgrade

In addition to performing the function of upgrade, this option also intelligently handles changing dependencies with new versions of packages; apt-get has a "smart" conflict resolution system, and it will attempt to upgrade the most important packages at the expense of less important ones, if necessary.

The /etc/apt/sources.list file contains a list of locations fromwhich to retrieve desired package files.