The actual upgrade happens when a controller is confident they need to move you. All sorts of scenarios that means a flight is overbooked can include late group bookings, delayed flights and reschedules with some advance warning, planes needing to be substituted, that kind of thing, a lot of staff standby travel appearing etc. A lot of controllers leave it quite late to do the upgrades as they might be hoping for some additional no-shows, but sometimes they are forced to do it early e.g. you get 6 hours notice of a delay causing a load of rebookings on to your flight, or a flight with lots of status pax, so you can't offload them.

Where you find out is when the computer scans your boarding pass and checks to see whether the seat number on your pass corresponds with the seat number in the computer. This is check-in or the boarding gate. When you get scanned to enter a lounge, it doesn't actually check your seat status (but reception can check and print a new one if you ask) - however, a controller will usually telephone the lounge and tell reception there to print a new BP for you when you arrive, or if you are already in the lounge, call you to reception to collect the new one. But that's not always necessary because once you get checked at the gate, there is always a BP printer there for the final seat check.

As Joe_EK mentioned though, there is always the JED-style op-up! Actually I once had a Y-J op-up that turned into J-F on board due to pax drama. So, not always at JED!