You will see Update (Manual) when the app's permissions have changed. So during the Manual update, you should be asked whether you accept the new permissions. Here's a reference from the Android Market forum. I read this somewhere else but this seems to be the only place I can find it right now. Quoting the link:
Froyo added an auto-update feature for
your apps. If an app has an update
and no new permissions, it will be
marked as the orange "update." If an
app has changed its permissions, then
it's red and you need to manually
update it (after checking and
verifying the new permissions of
course).
...
One more thing, you can verify this when you update your apps. If the app was a normal
"orange" update, when you click update, it will start downloading right away. If the app
was a manual "red' update, when you click update, you have to agree to the new
permissions, then it starts downloading.