V1 Update : whenever we create a transaction in R/3(e.g.Sales Order) then the entries get into the R/3 Tables (VBAK, VBAP..) and this takes place in V1 Update.
V2 Update : V2 Update starts a few seconds after V1 Update and in this update the values get into Statistical Tables, from where we do the extraction into BW.
V3 Update : It's purely for BW extraction.