rpi-update is a tool used to test out the latest firmware for the Pi.
It's described as "An easier way to update the firmware of your Raspberry Pi."
If you are one of those that believe the cutting edge firmware is always better and superior go for it. Personally I prefer to stick it out with the stable releases and updating as needed.
Normally to update an OS like Raspbian you simply run:
sudo apt-get update && sudo apt-get upgrade
I found the following best describes what it is from http://raspberrypi.s...ange.com/a/4363
rpi-update is a tool to upgrade the firmware for your Raspberry Pi. Firmware is a small package of code that usually lives on a special chip of a computer that helps the software know how to talk to the hardware. However, in the case of the Raspberry Pi, the firmware will live on the first partition of the SD card.
Raspbian is an operating system or the core software for your Raspberry Pi. Software (including the OS) lives on second partition of the SD card and is all the stuff that gets executed when you use your device.
Both of these need updating independently. For convenience, the rpi-update tool is included in the Raspbian distribution of Linux because it is a useful software tool that manages the firmware of your Pi's. You should run it periodically to make sure your devices have the latest firmware. Separately, you need to keep your software up to date using the standard Debian software management tools like sudo apt-get update && sudo apt-get upgrade.
Each of these functions is separate, and updating one will not update the other. Upgrading your distribution to the latest software packages might get you a new version of rpi-update, but unless you RUN rpi-update your firmware will not get updated.
Since the place the firmware is stored is actually flashed to the first partition of the SD card (sort of like a BIOS), you will not need to run this on every device. Once you load a new version of software or firmware onto an SD card, any device you plug that card into will be running that version.