Tellor uses an upgradeable proxy contract, separating the storage of data and the functionality of the contract.
The process for proposing an upgrade is as follows:
Deploy a new Tellor contract (with new Tellor functionality)
Propose vote to switch the proxy address to the new Tellor address
A week long vote occurs on whether to switch over.
The result is a simple majority of the vote, token weighted at the block the vote was proposed.
After the voting period, there is a day long chance for parties to dispute the results and start another voting period (after paying a fee).
If the vote passes with no disputes, the Tellor contract is changed.