If you are running Windows XP SP1 or SP1a on your computer, it is recommended that you install Windows XP SP2 as Microsoft is ending support to these older software versions on October 10, 2006. This also includes security updates for these Microsoft Windows service packs.
Which Microsoft Windows service pack are you using? Right-click My Computer on your desktop and then click Properties, this will tell you. According to the Microsoft Support Lifecycle Service Pack policy, Microsoft usually provides 24 months of support, however, this date for Windows XP SP1 or SP1a was extended to October 10, 2006.
Microsoft’s Support Life cycle policy provides predictable guidelines for product support availability at the time of product release and throughout the product life. This Lifecycle Policy FAQ provides an insight about how long Microsoft product support can be expected for Business and Developer products, and Consumer, Hardware, Multimedia, and Microsoft Dynamics (formerly Microsoft Business Solutions) products.
Why should you update? Firstly because new upgrades are more secure, have new features and bug patches to make your computer work smoothly. Companies stop support after a while as they want users to upgrade and want their engineers to continue fixing new stuff on the latest version, rather than waste time supporting older version prone to security hacks and virus intrusions.