update() adds data to the Cipher’s internal buffer, then returns all currently completely encoded blocks. If there are any encoded blocks left over, they remain in the Cipher’s buffer until the next call, or a call to doFinal(). This means that if you call update() with a four byte array to encrypt, and the buffer size is eight bytes, you will not receive encoded data on the return (you’ll get a null instead). If your next call to update() passes five bytes of data in, you will get an 8 byte (the block size) array back, containing the four bytes passed in on the previous call, the first four bytes from the current call – the remaining byte from the current call is left in the Cipher’s buffer.
doFinal() on the other hand is much simpler: it encrypts the passed data, pads it out to the necessary length, and then returns it. The Cipher is essentially stateless.