Let me explain some history on this. We introduced a capability in Windows Mobile 5.0 called Image Update this would allow a Mobile Operator or OEM to update the image of the device without having to do a complete ROM reflash. That capability is taken one step further in Windows Mobile 6 with Windows Update.
Windows Update is a mechanism to allow Microsoft to directly provide Critical Security Fixes to Windows Mobile devices.
Now imagine the scenario in Windows Mobile 5.0 - a critical and nasty security issue is found in the Windows Mobile operating system. If we (Microsoft) wanted to resolve that issue we would have to pass the fix to the OEM/Mobile Operator and have them then provide the fix to customers. That process could take many months as the fix goes through their testing and integration.
With Windows Update in Windows Mobile 6 we can provide the fix in such a scenario directly to the customer almost immediately.
Now I'm sure this will spark a whole set of comments of why can't we provide fixes to bugs and device issues. The reason we don't is that the OEM/Mobile Operator ultimately own the overall device build.