Better explain this with an example:
---cut---
$ hg update
0 files updated, 0 files merged, 0 files removed, 0 files unresolved
$ hg remove test.txt 
$ hg status
R test.txt
$ hg --debug update
resolving manifests
 overwrite False partial False
 ancestor fdedead1b396 local fdedead1b396+ remote fdedead1b396
 test.txt: recreating -> g
getting test.txt
1 files updated, 0 files merged, 0 files removed, 0 files unresolved
$ hg status
$
---cut---

Originally, I spotted this while doing a rename:
---cut---
$ hg update
0 files updated, 0 files merged, 0 files removed, 0 files unresolved
$ hg rename test.txt test1.txt
$ hg status
A test1.txt
R test.txt
$ hg --debug update
resolving manifests
 overwrite False partial False
 ancestor fdedead1b396 local fdedead1b396+ remote fdedead1b396
 test.txt: recreating -> g
getting test.txt
1 files updated, 0 files merged, 0 files removed, 0 files unresolved
$ hg status
A test1.txt
$
---cut---

Thanks!