What is a combo update and how is it different than the regular update?
When Apple releases a minor system version (e.g. 10.8.1 -&gt; 10.8.2), they generally release the update in two forms:

A delta update containing all of the files that changed in the latest update, which therefore can only upgrade from the immediately previous version.

For example, in order to install the 10.8.2 delta update, your system must already be updated to 10.8.1.

A combo update containing all of the changes since the original release of that major version, and therefore can be used on anything from the same major version.

For example, the 10.8.2 combo update can update from either 10.8.0 or 10.8.1; it can even be reinstalled on a system that's already running 10.8.2.
Similarly, the 10.7.5 combo update can be run on anything from 10.7.0 to 10.7.5.
(Note that for the first update to a major version, e.g. 10.8.1 or 10.7.1, there's no real distinction between delta and combo, so Apple only publishes a single update form.)
If you have a Mac that's running the next-to-latest version and want to update it, the delta is technically all you need. But some people (myself included) tend to prefer the combo, for a couple of reasons:

I update a lot of computers, so to save time I carry the latest updates on my tools HD. It's simplest to just carry the combo update and not worry about the deltas as well, since you can use the combo anyplace the delta would be appropriate.

If anything has gone wrong with any of the previous updates, running the combo will generally clean up the problem, while a delta might leave it broken. In fact, sometimes re-running the combo on an already-updated computer will fix problems like this, so it's a useful trick to have in your troubleshooting repertoire. (Mind you, the types of problems this solves are rare; but they tend to be ones that otherwise would've involved hours of troubleshooting and hair-tearing, so it's often worth a try.) (Also, you can't/shouldn't reinstall even a combo update after applying a supplemental or security update that came out after it; that'd be a downgrade, and might cause problems.)


UPDATE: There's a complication I left out, and some other things have changed and gotten messier since I originally wrote this. So I'm issuing a supplemental update.
One major recent change is that, starting with macOS Big Sur (aka macOS 11), Apple isn't releasing OS updates in downloadable format. Updates come via the Software Update mechanism, either in System Preferences or with the softwareupdate command. It automatically figures out what update(s) you need, so this question is a bit moot.
The complication I left out is that in addition to the delta and combo minor-version updates I describe above, there are also even-more-minor OS updates, called &quot;supplemental updates&quot; and &quot;security updates&quot; that don't change the version number, just the build number. For instance, the original release of Catalina 10.15.7 was build 19H2, but then Apple released a supplemental update which brought it up to build 19H15, and then security update 2020-001 brought it up to build 19H114, and then security update 2021-001 was build 19H512, and then... well, I'll get to that.
Note: in the build numbers, the first &quot;19&quot; corresponds to the major version (Catalina v10.15), the &quot;H&quot; corresponds to the minor version (&quot;.7&quot;), and everything after that is the more specific sub-minor-version number.
Supplemental and security updates are usually combo-like within the release they apply to. For example, if you have 10.15.7 build 19H2 or 19H15, you can install security update 2021-001 without needing to install the intermediate updates first. But not always -- for some reason, security update 2020-006 for Mojave 10.14.6 required installing security update 2020-005 first (although neither 2020-005 nor 2020-007 required any earlier security updates).
Supplemental updates generally come out right after another update/release, as a quick fix for problems discovered in that update/release. Sometimes, the installers for that release get updated to roll in the supplementary update. For instance, if you download either the Mojave 10.6.4 delta or combo update, you'll get a package that includes the updates in the 10.14.6 supplemental update (actually, there were several 10.14.6 supplemental updates, but let's not talk about that).
The supplemental updates for Catalina 10.15.7 are even weirder. The first one wasn't rolled into either the 10.15.7 delta or combo updates. It was also released in two forms itself, a delta version that could only update from earlier builds of 10.15.7, and a &quot;combo&quot; version that -- if I'm reading its Distribution file right -- can only update from 10.15.6 (or be installed on top of itself), but cannot update from earlier builds of 10.15.7!
And then there's this month, February 2021. On Feb 1, Apple released macOS Big Sur 11.2, and also parallel security updates numbered 2021-001 for Mojave 10.14.6 and Catalina 10.15.7, both in the usual combo-within-version form. Normal so far. But almost immediately after that, on Feb 8, another round of security updates was released. For some reason, the Big Sur update got a new minor version number (11.2.1), for Mojave this was called Security Update 2021-002, and the Catalina update was called &quot;macOS Catalina 10.15.7 Supplemental Update&quot; (not to be confused with the &quot;macOS 10.15.7 Supplemental Update (Delta)&quot; and &quot;macOS 10.15.7 Supplemental Combo Update&quot; that came out earlier).
(The 10.15.7 update may've gotten a different name because, in addition to the security updates, it apparently also contains a fix for a battery charging problem.)
But the naming on this new Catalina 10.15.7 update is even more inconsitent than that. If you look at that download page for it, the title is &quot;Security Update 2021-001 (Catalina)&quot; (identical to the Feb 1 update), but the body text calls it &quot;macOS Catalina 10.15.7 supplemental update&quot;. If you download the file, it's named &quot;SecUpd2021-001Catalina.dmg&quot; (again, identical to the earlier update's filename). Mounting it reveals a volume named &quot;macOS Catalina 10.15.7 Supplemental Update&quot; containing an installer package named &quot;SecUpd2021-001Catalina.pkg&quot; (again, identical to the earlier update's filename). Then, when you open the package in the Installer application, it calls itself &quot;macOS Catalina 10.15.7 Supplemental Update&quot;.
Aaaaaaaa!
Maybe I'll just call it build 19H524 for the sake of my sanity. At least it's a proper combo-like update-any-earlier-build-of-10.15.7 updater.