I am a bit confused about all the talk of updates, I have a phantom 2 v3.
Why does it have to be updated? when its working as is, what does the update do? is there problems with how the phantom is set up at the factory?

I am getting a bit worried about a flyaway, I have already had one flyaway with another cheaper brand after only 4 minutes in the air. Yes I am an amature at the hobbie but did everything by the book, the " other" company has agreed to replace the flyaway model, I did find the model after 3 days searching, and returned it to them, I'm assuming they tested it and found there was a fault.

So I am reluctant to play around with updates on my phantom unless I have too.

If you think of these machines as more software than hardware (which they are), then the updates are very similar to that for any operating systems. It's how you improve and/or fix things.

That said, it's always prudent to wait a few weeks or months after an update and see what others are saying....this is the same when it comes to computer operating systems. Heck, I'm still using Mountain Lion (2 systems back!) on my Mac Pro.