Domain transfer are refers as transferring your domain from one Domain Registrar to another, which means the new registrar takes over the domain DNS management and billing for your domain.
DNS update are refers as pointing the Domain Name Server from one hosting provider server to another hosting provider server. Your website or email services will be facing downtime after the DNS is updated, which normally take 18 to 72 hours of domain propagation period before your domain fully resolved to the new server. Therefore, it is advisable to perform during off peak hours.