The switch will perform a compatibility check and provide an "impact table" showing whether the upgrade will be disruptive (requiring a reboot) or non-disruptive (ISSU - In-Service Software Upgrade).
: This file extension indicates that the file is a binary executable, which in this context, likely means it's an image file meant to be loaded onto a switch's flash memory to install or upgrade the NX-OS. Nxos.7.0.3.i7.6.bin