Windows Update is software designed to help keep your computer current and more secure by automatically downloading and installing the latest security and feature updates from Microsoft.
Windows Update determines which updates are applicable to your computer and can download and install them automatically to keep your computer up to date and more secure. To help prevent unexpected changes in how your PC works, Microsoft may sometimes ask you to accept an update before it's installed, even if you have automatic settings selected.
How To Turn on Windows Update
Turning on Windows Update is simple. As you set up your new PC, you'll be asked if you want to "Help protect Windows automatically." Just select one of the green shield options (see screen shot below) and Windows Update will check for, download, and install new updates for your PC.
Microsoft recommends the first option "Use recommended settings" so that you automatically receive all Important and Recommended updates. Microsoft also recommends that you turn on other features such as the Internet Explorer Phishing Filter to help protect your PC and personal information.
The second option "Install important updates only" will check for, download, and automatically install only Important updates.

You can also change the automatic update settings anytime with the Windows Update control panel. And you can review and install Optional updates from the panel.
To do change the automatic update settings
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Open Windows Update (click the Start button, click All Programs, and then click Windows Update).
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Select Change Settings and choose how you want Windows to install updates.

Additional Features
If you want to take a more active role in managing the update process, Windows Vista includes a range of options that give you control over how you are notified about the availability of updates, as well as the option to review and approve updates before they are downloaded or installed.
At any time, you can also proactively check to see if any updates are available for your PC. Using the Windows Update control panel, you can scan for updates, review details about each one, access your updating history, and manage your updating preferences.