Q. In the preview Azure Portal there is an Automatic Updates OS Setting option, what does this do?
A. With the new blade architecture of the preview Azure portal it is possible to provide a much richer interface when provisioning a new Azure VM. One of these options is to set Automatic Updates to On (the default) or Off. This setting refers to the Windows Update initial setting. By leaving the default selected Windows Update will be enabled by default within the guest OS. This setting can be found under Optional Configuration - OS Settings as shown below.
This is documented at https://msdn.microsoft.com/en-us/library/azure/jj157194.aspx, specifically the EnableAutomaticUpdates parameter.