Hi,
From the man-page:
"upgrade is used to install the newest versions of all packages currently installed on the system
...
dist-upgrade, in addition to performing the function of upgrade, also intelligently handles changing dependencies with new versions of packages"
Quote:
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I only want currently installed packages to be updated and packages improving the reliablilty/stability of the OS to be installed.
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Dist-upgrade will not go and install every package under the sun.
Well, if you want to do a distro-upgrade, use dist-upgrade. For instance, moving from Debian -stable to Debian -testing. Dist-upgrade is a special upgrade that is used if you are fetching packages from a new location, which is specified in /etc/apt/sources.list
If you want to simply upgrade the packages you have installed for your current distro, use 'apt-get upgrade'.
I hope that clears up your confusion.