I don't recall there being a cancel button on the enter passcode screen.
It's as much of an auto install as those adware/toolbars that are bundled with installers with the install option checked which you carefully need to deselect at every step.
Basically the default option if you just do what's presented to you on the screen is an auto install unless you carefully manage to avoid it instead of asking the user straight up if he wants to install the update or not.
There's a "Remind me Later" button at the bottom as I recall.
Yes, Apple wants you to update. This is normal. We aren't in the Windows XP era any more.