The hardware in a location is divided in to multiple update domains and fault domains. An update domain is a group of VMs and underlying physical hardware that can be rebooted at the same time. VMs in the same fault domain share common storage as well as a common power source and network switch.
Microsoft updates, which Microsoft refers to as planned maintenance events, sometimes require that VMs be rebooted to complete the update. To reduce the impact on VMs, the Azure fabric is divided into update domains to ensure that not all VMs are rebooted at the same time. https://docs.microsoft.com/en-us/azure/virtual-machines/windows/tutorial-availability-sets