The third argument to PyMongo’s update() is upsert and must be passed a boolean, not a dictionary. Change your code to:
self.word_counts[source].update({'date':posttime}, {"$inc" : words}, True)
Or pass upsert=True as a keyword argument:
self.word_counts[source].update({'date':posttime}, {"$inc" : words}, upsert=True)
Your mistake was likely caused by reading about update() in the MongoDB docs. The JavaScript version of update takes an object as its third argument containing optional parameters like upsert and multi. But since Python allows passing keyword arguments to a function (unlike JavaScript which only has positional arguments), this is unnecessary and PyMongo takes these options as optional function parameters instead.