If your Shopware Admin shows the blue notice Update or Update to x.x.x next to an extension under Extensions → My Extensions, it always means: the installed version is outdated and a newer version is available. Where this newer version comes from depends on the type of extension.
If an update is available, you should install it promptly. Outdated versions can lead to compatibility issues — especially if Shopware itself has been updated or other extensions require newer dependencies.
Extensions from the Shopware Community Store (e.g. Pickware ERP)
For extensions obtained through the Shopware Community Store, a new version is available in the store. You can perform the update directly under Extensions → My Extensions.
Manually uploaded extensions (Pickware WMS and Pickware POS)
Pickware WMS and Pickware POS are not distributed via the Shopware Store, but downloaded as a ZIP file from your Pickware account and uploaded manually in the Shopware Admin. In this case, the Update link means: a new version of the extension has already been uploaded, but not yet installed. Only by clicking Update to x.x.x is the new version actually activated.
To find out how to download a new version for Pickware WMS and Pickware POS and complete the installation, see How do I install updates for Pickware POS and Pickware WMS?.
For general information on update order and compatibility, see What do I need to consider with software updates?.