Upstream refers to the original project that develops and maintains a piece of software, such as the Linux kernel. Downstream projects, such as Linux distributions and device makers, take the upstream code, package it and ship it to users. A fix made in the upstream project then travels downstream over time.
The terms matter for security because the two are not in step. A fix may be committed upstream before any distribution has released an update, and a distribution may apply it to an older kernel version that it still supports. As a result, being fixed upstream does not mean your system is fixed.
Version numbers can also mislead. A distribution kernel with an older upstream version number may already contain a backported fix, while a newer-looking number does not by itself guarantee one. The vendor's advisory is the reliable reference for which build contains a given fix.
To act on an upstream fix, find out when and how your distribution has shipped it, install the updated kernel package, reboot or use a supported live patch, and confirm the running kernel afterwards. Follow your vendor's security notices rather than tracking upstream version numbers alone.