This new feature will be similar to how Chrome handles its updates. In this case, the older version of Android N will be able to seamlessly switch into the new version, separate from the rest of the phone's data. That means all those "Android is upgrading" prompts after system updates will be gone.
All of this is due to the new JIT compiler, which speeds up the update process for Android N. It should also lead to 75% faster app installation. Also, the amount of installation storage space for Android N apps will be 50% less than before.
Stay tuned for more news from the Google I/O 2016 keynote event.