You can upgrade either over-the-air with WIFI or upgrade with a hard wired cable connection to your computer. If you use the WIFI connection, the download has to have room for the download, the un-compressed files, and then the install working files, as well as space to recover in case there is an OOPS if the install fails. All of that takes space on the device. If you use your computer, you only need space for the install, a much smaller amount of usable space is required to do the job. There are actually a lot of iPhone users who don't have a computer and get their music over the air now.
Are there any reliable stats or surveys that identify what percentage of iPhone users fall into that category? I can't imagine it's more than a few percent, but I could be mistaken.