I recently had a conversation with a friend who stated categorically, that she never performs Windows Updates. Never. As an IT guy this rang a few alarm bells, so I asked her why not.
She had been told by a friend of a relative who "works in computers" that updates just break other things and its best left as is. I realized that, this out-dated concept is more common that I had thought. It is up there with the other mis-beliefs, such as "Macs never get viruses" and "Always drain your battery to 0%".
So just to clear this up;
Updates fix previously identified problems and SECURITY HOLES - not installing updates is like leaving a window open all the time because the new one "might not fit"
Many years ago, back in January 2002, Microsoft started the Trustworthy Computing directive and in 2004 started developing all of their software with the Software Development Lifecycle. A process to develop software along a specific set of guidelines (which can prevent problems with software from among other things, the update process)
Updates and patches may, on occasion, have some weird result on a limited number of computers (remember everyones is slightly different) but the overall effect is to keep your system running in a proper secure and safe manner. As time progresses, the software itself is getting better - for example; Windows NT4 had 7 service packs, Windows XP has had 3 - half of the Windows NT line.
Did you know: A large percentage of viruses or cyber-attacks take place because the software has a vulnerability - or hole - in it, that they can take advantage of. The longer you leave the hole there, the more likely someone malicious will take advantage of it. An unpatched Windows XP machine, directly connected to the internet can be compromised in under 4 minutes?
So... the short of it is, with the rapidly changing threat landscape, you should keep your software up to date (and not just Microsofts) and install software fixes within a relatively short period after being released.