docs: clarify install vs update command differences

docs/cli.md

@@ -475,6 +475,15 @@ poetry init
 The `install` command reads the `pyproject.toml` file from the current project,
 resolves the dependencies, and installs them.
 
+{{% note %}}
+**When to use `install` vs `update`:**
+- Use `poetry install` to install dependencies as specified in `poetry.lock` (or resolve dependencies and create the lock file if it's missing).
+  This is what you run after cloning a project. For reproducible installs, prefer `poetry sync`,
+  which also removes packages that are not in the lock file.
+- Use `poetry update` when you want to update dependencies to their latest versions (within the constraints from the `pyproject.toml`)
+  and refresh `poetry.lock`.
+{{% /note %}}
+
 {{% note %}}
 Normally, you should prefer `poetry sync` to `poetry install` to avoid untracked outdated packages.
 However, if you have set `virtualenvs.create = false` to install dependencies into your system environment,
@@ -1276,7 +1285,14 @@ you should use the `update` command.
 poetry update
 ```
 
-This will resolve all dependencies of the project and write the exact versions into `poetry.lock`.
+This will resolve all dependencies of the project, write the exact versions into `poetry.lock`,
+and install them into your environment.
+
+{{% note %}}
+The `update` command **does not** modify your `pyproject.toml` file. It only updates the
+`poetry.lock` file with the latest compatible versions based on the constraints already
+defined in `pyproject.toml`. To change version constraints, use the `add` command instead.
+{{% /note %}}
 
 If you just want to update a few packages and not all, you can list them as such: