That update isn't related to background refresh; it's because people upgrading from iOS 13 to 14 complained that newly-installed apps didn't have any widgets, or that upgraded apps didn't have upgraded widgets.
After loads of people had to post "you need to run the app at least once so that the widget can be extracted and any displayed-data downloaded", Apple decided to automate it with a toggle option.
After loads of people had to post "you need to run the app at least once so that the widget can be extracted and any displayed-data downloaded", Apple decided to automate it with a toggle option.