I have not updated my Android Studio for a while and am presented with this dialog box when trying to update:
The chosen answer is somewhat wrong. I know It's a little confusing an therefore I'm posting my solution.
Sometimes Android Studio reminds about a new available version for the stable channel but the way to update automatically (as stated in the release info page) is to switch the Channel in your preference:
File -> Settings -> Appearance & Behavior -> System Settings -> Updates
and change the setting "Automatically check updates for" to Beta Channel.
Then, perform a Check for updates (or restart your ide) to be prompted with the option to install automatically.
BTW you cannot install upgrades that are totally incompatible with the previous version, but as I'm aware of, the compatibility list is also available on the update page per version release. I.E.: You can upgrade from 1.4/1.5 to 1.5.1, but not from 1.3.
I hope this will help someone.