Apt-Get Upgrade installs the newest version of files from existing packages. Currently installed packages are never removed. Packages not already installed are never retrieved to be installed.
upgrade is used to install the newest versions of all packages currently installed on the system from the sources enumerated in /etc/apt/sources. list. Packages currently installed with new versions available are retrieved and upgraded; under no circumstances are currently installed packages removed, or packages 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 manages dependencies and will upgrade the most important packages while preventing conflicts:
dist-upgrade in addition to performing the function of upgrade, 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. So, dist-upgrade command may remove some packages. The /etc/apt/sources.list file contains a list of locations from which to retrieve desired package files. See also apt_preferences(5) for a mechanism for overriding the general settings for individual packages.