In MCC, under Software, the "Update" icon is to allow you to update your software, like you expect. If you click on it, it will display the software you have installed that has new versions for Security patches, Bugfixes, or just normal updates. (You can select by checkbox any or all of the three options.)
There is also an "Update" button available on most of the Software screens, that is for the purpose of updating your urpmi sources, to make sure you have the most recent directory lists of software available.
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