Is Android M an update of Android Lollipop?

Well, any newer version of Android is definitely an update on the previous version. Just like KitKat was an update on Jellybean and Lollipop an update on Kitkat- the next update will be Android M .We just need to wait to see the exact naming. Unlike the incremental updates often seen all along the year, this will be a major update.
It is bringing a lot of newer improvements to the operating system. Some of them being -
Android Pay.
Improved app permissions.
Newer native finger print support.
New app drawer.
and many more such developments.

Yes, one can find many changes and improvement in latest version of Android M OS which mainly focus on "Polish and Quality". The expected features as per the report of Google I/O 2015 might be followings:

1. Android Pay and Fingerprint authentication
2. Up-gradation of Google Now
3. Better Battery power and life
4. RAM usage improvement
5. Security features
6. Google Photos
7. Virtual reality
8. Simplification in App permissions
9. Better linking between apps