The upgrade notifier sends you a notification email when one of your Joomla installations in not up-to-date. When you download the zip file, it contains 2 components: com_updatz and com_version.
This component needs to be installed only on one 'master' site. Here, you can add as many 'sites under control' as you want. When you add a site under control this Joomla site is checked for it's version. You need to put the name of the site, the email to notify when, the site is not up to date and a XML url. The com_version component is used to generate this XML url. Since Joomla! does not yet provide a XML feed of the latest version, you will need to set the current version in the configuration of the com_updatz component.
In addition, there is also a frontend link to com_updatz, when this link is loaded, all the emails that are set in the individual sites are sent a warning if their Joomla sites are not up to date.
This component needs to be installed on each site that needs to be checked for upgrades. Once you install the component, go to the admin link of the component, where you will see a XML link automatically generated. This is the XML link that you need to give in the com_updatz component when you add a 'site under control'.