Keeping your system up to date, with the latest updates, is important both for performance and security. System and software updates often have performance enhancements that make your system run faster.
More often, however, these updates are for security purposes. The majority of the virus and hack attacks that have been in the news, are exploiting security holes in the operating system, or software packages. In the majority of cases, these security have been fixed, but with so many systems out there that are not patched, these are still able to spread.
It is very common, once a security hole is found and patched, for the number of malicious attacks trying to exploit the fixed vulnerability to rapidly increase. This is because the hackers, and virus authors, know that in too many cases these patches will not be installed. So, they wait for the announcement of a fix, and then attempt to exploit the vulnerability. They are often successful because of the large number of unpatched systems.
A classic example of this is the Cornficker virus that had so much news about it at the end of March. This virus exploited a security hole in Windows, that was patched in released in October, 2008. The Cornficker virus appeared in November 2008. In April 2009, the number of infected computers world wide is estimated in the millions.
The Windows operating system, is the one that we most often hear about with security patches. However, if you are running UNIX, Linux, or any other operating system, you should be aware of the patching that is being done with them, also.