The hg update alias to hg checkout comes from analogy with svn and I think cvs. A bare hg update corresponds to the svn command (after a pull, which doesn’t exist in svn) and an hg update $rev also matches the idea of updating to some revision other than the latest one.
hg update $rev
In fact, most of the hg terminology matches svn terminology whenever possible, which at the time was the status quo. Git ignored a lot of existing VCS conventions, one of the reasons why its UI feels so complicated to many people. Now that git is the status quo, hg’s once-standard conventions feel like the odd ones out.
By the way, you can abbreviate all commands to their shortest unique prefix. I often type stuff like hg up -r $rev or hg di. There are also a few built-in aliases you’ve already found like co for checkout/update and ci for commit (“check in”, from cvs and svn).
hg up -r $rev