The correct command to update your package list is:
sudo apt-get update
Then, the command to actually upgrade your Ubuntu (i.e. download and install the newer versions of packages) is:
sudo apt-get upgrade
See my answer to this question: http://askubuntu.com/a/344363/52726 for a little bit more explanation on the difference between
apt-get update and
The command to install packages (or "applications") is:
sudo apt-get install <packagename>
<packagename> is the name of the application. For example
vlc, and so on.
The command you ran,
apt-get install update is telling Ubuntu to install a package called
update, which doesn't exist.
From your comment, it seems that you are trying to install
iftop, but it's telling you it's not there.
iftop is in the Universe repository, so you need to enable it. Visit this question: How do I enable the "Universe" repository? to enable it. When you enable it, first do
apt-get update, then try
apt-get install iftop.