I think there's a distinction - I would consider an "update" with new content to be something minor (such as BG3's recent epilogue content). "Free DLC" to me is a much more hefty addition, such as the Godmaster DLC for Hollow Knight.
(Disclaimer: I've not watched this trailer since I'm at work)
The Witcher 3 had 16 free dlc packs after release. I have no idea what they were or their distinction. Was definitely a marketing term for content updates that they can't sell because the content is so miniscule.
That's a fair point. Maybe it comes down to "is this something that you expect should have been in the game to begin with, or is it something extra that the Devs have added over and beyond?".
Definitely a very broad term to the point of near-meaninglessness though.