Passives are pieces of mech equipment that confer a constant status effect without the need for activating them during an encounter. Since they don't need to be activated, they will work even when mech is submerged into Water, Lava, A.C.I.D. or affected by Smoke.
Some passives come with an upgrade or two, at the cost of additional Reactor Core usage. Upgrades are not purchased separately, they are included.
Note that powering Upgrade 1 is never a prerequisite for powering Upgrade 2.