Hello Rush,
Great questions there. In a theme update, WordPress actually deletes all the original theme’s files and installs a fresh copy of the theme from our server. So any customizations that have been made directly to theme files will be lost. Anything in the theme options/customizer, page/post content, and plugins will be left as is.
So as long as you haven’t made any direct edits to theme files you can upgrade. If you have edited theme files, you’ll want to make a backup of those before you update. That way you can either make the same edits again, or include them in a child theme. If you’ll look on the home page of our support site you’ll see a post that can walk you through creating a child theme.
For backups, I’ve had good success with BackupBuddy. It’s not inexpensive, but it does work well. Plus it makes moving sites rather painless. Lots of people also like Backup to Dropbox.
Hope that helps out,
Bill