Till recently it was very confusing for me what is Scale up and what is Scale out?
Scaling up means you will be adding more processing power to a server machine you have got to meet the scalability needs.
Whereas when somebody says, we need to Scale-out it means, they will add more machines to meet the make their system scalable. Then with the use of load balancer, each request will be served by a server node.
Actually now more emphasis on scaling out architecture because system clock speed has stalled. Now if we need more processing power people are going to multiple cores. So it makes sense to distribute the load on multiple servers rather than adding more resources to a single machine. And also with the scaling up option, there is need to buy high-end servers, which are costlier. And also they may become single point of failure.
Scale up is also called as verticle scaling and Scale-out is also referred as horizontal scaling.