It's an upgrade in that all of your settings will follow over to the new release (And a nice one at that), however like in the past you'll have to install this by itself. So to answer your question...I guess you can say it's sorta both.
The good news is any new releases from now on will be treated as upgrades, should work in the same fashion as when you upgrade your extentions...speaking of which, some are slow to catch up to 1.5. On a few (Cookie Culler/Linky) I had to go to the developer's homepage and manually download/install. Other than that you shouldn't have any problems.