A milestone is a stage of an Upwork fixed-price contract with its own description, due date and amount, funded by the client into escrow before work starts and released to the freelancer when the client approves the submitted work.
Every fixed-price contract is a sequence of milestones, even if the sequence has one entry. The client proposes them when sending the offer, or the freelancer proposes them in the proposal, and either side can add, edit or remove milestones later with the other's agreement. Funding is the important step: a milestone that is "active" has its amount sitting in escrow, while one that is merely listed has nothing behind it. Upwork's Fixed-Price Protection applies to funded milestones only.
When the work is submitted the client has a review period, set by Upwork, to approve, request changes or raise a dispute. Approval releases the funds, and silence releases them automatically when the period expires. A client can also release part of a milestone, or add a bonus payment on top of it.
Milestones are a scoping tool as much as a payment tool. Breaking a project into funded stages gives the freelancer a guaranteed payment for each stage and gives the client a checkpoint before committing more money. The usual mistakes are starting work on an unfunded milestone, and agreeing one large milestone for a long project so that nothing is paid until everything is done. Upwork's Help Center describes the funding, approval and refund rules, and the review window may change.
How Upwork Insights uses it
This term describes Upwork's own rules or product rather than a figure the index measures; the pages that do carry live figures are the stats and rate pages.