You tend to pay extra for more whatever software you install.
(Like death and taxes, upgrades are forever.)Word focuses on one application--Word Press--and offers to maintain a limited version of that application for your website for free.
You can both pay less than you would elsewhere for hosting avoid having to maintain the software yourself. If you think of this as web hosting, rather than software, it makes sense. As convenient and smooth as Word is, upgrades can add up.
You might start to think wistfully of a more traditional hosting plan, where you pay a flat fee to install as many Word Press sites as you can fit.
Multiple sites are definitely a good reason to consider self-hosted Word Press.
Plugins are chunks of code that give your web site extra powers, like forums with bb Press or social networks with Buddy Press.
You install plugins on self-hosted copies of Word Press.
You say that upgrades are used on Word sites, while plugins are used on self-hosted Word Press sites elsewhere.
But this would be incorrect, because Word developers incorporate plenty of plugins into Word sites.
In fact, the Word folks have developed several plugins specifically Word Press.com, and then released them to the community with the Jet Pack plugin.
So it's not that Word uses upgrades instead of plugins.
Word uses plugins too; you just can't add your own. Most web hosts have no free plan and charge you a flat monthly fee, with a discount if you pay by the year.
In exchange, you can usually install pretty much anything you want.