Upgrade Llamas are a type of "lootbox" in Fortnite. When first hit, they have a small chance of turning silver, which will drop slightly better items. Subsequently, a silver llama also has a small chance of turning gold, the max tier for a llama, and will usually drop items high up on the rarity scale. They cost 50 V-Bucks.
There are also Mini Reward Llamas, daily special llamas and limited launch event llamas.