Difference Between Refresh DP and Update DP

Update distribution points increments the package version, goes to the source location, constructs new package content but only sends the delta between what is already present on the DP and what is currently in the new package source. Also this action is package specific and once you trigger this action all the DPs to which the package has been distributed will get the new version.

Refresh distribution points does not increment the package version but simply sends out the current version of the package content again to a specific DP. So this is action is specific to a package-DP assocation and should be used when the content on any particular DP appears corrupted.