(edit @knz 2018-05-19)

UPDATE X SET ... = Y FROM Z
https://www.postgresql.org/docs/10/static/sql-update.html

performs (I think) a lateral join of X with Z and then makes the values computed by Z available for the scalar expressions in Y, to serve as values to update.

Full support for the feature needs support for correlated subqueries #3288 and lateral joins #24560.

Reduced support when the relational expression Z is uncorrelated (a common case) could perhaps be added with a simple join, although additional execution machinery is still needed to propagate the PK prefixes for the X operand to the join through up to the point UPDATE can pick them up.

As to which rows get updated:

• Rows of table X that don't match in the join are not updated.
• Rows that match in X with the join on Z are updated. If there is just 1 matching row (or if there is a cross join but the right operand has just 1 row), then the situation is clear. I am not exactly sure what happens if there are multiple rows.

The work to be done is twofold:

• construct (and properly optimize) the data source with a join when FROM is specified
• plumb the PK values properly so that UPDATE still has PKs to work with.