Q: How do updates work?

Pages, Number and Keynote are are applications that come with all new Macs. They correspond to Word, Excel and Powerpoint in Office.

You do not have to pay for updates.

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Keynote, Pages, and Numbers are Mac applications.  They are corollary to PowerPoint, Word, and Excel.  You do not pay for updates, just like you don't pay to upgrade your OS.  You cannot avoid the "iTunes nonsense," because iTunes comes bundled with OS X — when you install it, you get all parts of it.  To update, you would go to the Mac App Store and at the top, click on "Updates."  You will then go to the Updates tab, and you can download/install your updates from there.

Updates are in fact free.  When you have a stable internet connection I would definitely recommend updating any and all that are available to you.

There is a great article here (How to update OS X and Mac apps - Apple Support) that shows a walkthrough for updating your Macbook Pro.

Also below please find a brief description (taken from the apple site) of Keynote, Numbers, and Pages:

Keynote for Mac makes it simple to create and deliver beautiful presentations. Updated for OS X El Capitan, Keynote employs powerful tools and dazzling effects that bring your ideas to life. You can work seamlessly between Mac and iOS devices. And work effortlessly with people who use Microsoft PowerPoint. (more here http://www.apple.com/mac/keynote/)

With Numbers for Mac, sophisticated spreadsheets are just the start. The whole sheet is your canvas. Just add dramatic interactive charts, tables, and images that paint a revealing picture of your data. You can work seamlessly between Mac and iOS devices. And work effortlessly with people who use Microsoft Excel. Updated for OS X El Capitan, Numbers is now more powerful than ever. (more here http://www.apple.com/mac/numbers/

Pages for Mac is a powerful word processor that gives you everything you need to create documents that look beautiful. And read beautifully. Redesigned for OS X El Capitan, it lets you work seamlessly between Mac and iOS devices. And even work effortlessly with people who use Microsoft Word. (more here http://www.apple.com/mac/pages/)

Why is there no suitable category to post this in?

Technically, there are:

You may want to consider signing up for some classes at your local Mac Store.