And while pirated versions may update, they are not legitimately licensed versions of Windows 10. Using them is still illegal.
Yup, there was some misunderstanding in the press a while back about it, I believe. Lots of people were reporting that inactivated systems would be activated by the upgrade, but that's not the case:
Counterfeit software
If you have a counterfeit copy of Windows that wasn't published and licensed by Microsoft, activation won't work because Microsoft won't be able to create a match between your PC's hardware profile and your 25-character product key.