Update the system from terminal

You need to perform dist-upgrade inorder to install/remove all dependencies related to the packages upgraded using upgrade. From the manual page of apt-get:

  dist-upgrade
       dist-upgrade in addition to performing the function of
       upgrade, also intelligently handles changing dependencies
       with new versions of packages; apt-get has a "smart"
       conflict resolution system, and it will attempt to upgrade
       the most important packages at the expense of less
       important ones if necessary. The dist-upgrade command may
       therefore remove some packages. The /etc/apt/sources.list
       file contains a list of locations from which to retrieve
       desired package files. See also apt_preferences(5) for a
       mechanism for overriding the general settings for
       individual packages.

So, the better way of upgrading would be:

sudo apt-get update
sudo apt-get upgrade
sudo apt-get dist-upgrade

However, be careful while using dist-upgrade as it might also remove packages to satisfy dependencies.

apt-get upgrade won't install new software or remove software, something you must when installing a new kernel... See the thread.

A thing you can do (taken from this thread, read full for more):

Use aptitude:

sudo aptitude update
sudo aptitude safe-upgrade
sudo aptitude full-upgrade

You could also use sudo apt-get dist-upgrade instead of sudo apt-get upgrade