Plug In Updating

Can someone tell me how plugins are supposed to be updated?

I had my site hang this morning and my hosting company said it was a plugin that was malfunctioning. I had to move them all to a different directory and the move them one by one back to the plugin directory to find the culprit.

I thought it was odd that the site worked fine earlier in the morning but was hung now and I had not updated any plugins since then.

I then saw the the plugin causing the problem was updated just minutes before the problem took place.

Aren’t plugins supposed to notify you of an update and require an install of the update or is it common practice to update them on the fly like that, which too me seems like a bad approach because an update can easily conflict with other plugins or themes running.