MongoDB's update-in-place feature allows for fast updates by minimizing the need to allocate and write full copies of objects, which can be highly performant for frequent update use cases. The database uses a lazy approach to disk writes, only writing data once even with high volumes of updates. However, when an object grows beyond its previous allocation space, it must be moved to a new location in the datafile, which can lead to slower performance due to the need to update index keys. To mitigate this, MongoDB employs an adaptive algorithm that computes a padding factor based on growth frequency, aiming to minimize moves and optimize updates.