To understand Vector3.up, it helps to clarify what a vector is. A vector is an ordered set of numbers representing something. In this case, a Vector3 is an ordered set of three numbers where the order of the numbers represents x-coordinates, y-coordinates, and z-coordinates (in that order). The unity documentation https://docs.unity3d.com/ScriptReference/Vector3-up.html states that Vector3.up is simply a shorthand version for typing Vector3(0, 1, 0). Within the context our the game and usage here, this can be taken as, advance 1 unit in the y dimension. For our ship, if you select it in the scene view, this does indeed correspond to the intuitive up direction in the scene, when the body is at rest. Remember though, since this is only attached to our ship the up direction is relative to the ship itself, not the world. Thus as it turns, it will still advance in the y direction that is “up”; the direction in which rocket shaped ships would be pointing.
See https://docs.unity3d.com/ScriptReference/Vector3.html for more information on Vector3 aspects within Unity