Renovation of a program to a higher version. A HW part upgrade means renovation of the equipment, it means replacement of some components for newer ones.
A software upgrade means replacement of the older version for a more recent one. For the owners of older versions an upgrade is offered
for a lower price. Some software companies offer full version of a product if you prove that you lawfully own a similar competing sw product. E. g. there exist upgrade from Windows 2000 to Windows XP, or from Wincmd v. 4.0 to v. 5.0.