The firmware is software that comes with most devices, Its job is too to run the device, this could be a DVD burner, ipod or a psp. Sometimes, the firmware of a console is shipped with some unknown errors that aren't discovered until the unit has already been sold into the market. Devices are shipped with fully working firm ware, if it doesn't work it would never make it onto the market. When a manufacture releases new features to a device (for example dashboard on xbox 360) The firmware needs to be updated before this new feature is accessible. most firmware updates take seconds to download and are easily installed.

If a add on or new game is released that requires new firmware to run it is mandatory for the maker to provide the firmware to you. So you never have to really worry about keeping firmware up to date because if its needed it will be supplied.