Upgrades, like the name suggests, improve a particular Awesomenaut's abilities and/or autoattack. Every awesomenaut has 24 upgrades split into 4 different rows (with 6 on each one).
The upgrades in the first 2 rows improve the 'nauts' two abilities while the ones on the third row improve their autoattack. These are always unique upgrades, accessible only to that specific character.
The fourth row (often called "utility row") however, has generic upgrades available to many different 'nauts, although some exceptions do occur. A player must select 3 upgrades from each row for a total of 12 before being allowed to play with a 'naut. No more, no less.
Upgrades provide many varied effects to the abilities and attacks such as increasing damage dealt, reducing cooldowns or even adding new effects such as Lifesteal or Blind. Upgrades that improve abilities cannot be purchased before the actual ability itself.
A particular set of upgrades is called a "Loadout".