There are two ways to approach this question: a. Is the version of your current driver older than the latest one available? You can check up on this (in Windows) by going to the properties of the device in question in the Device Manager (in the My Computer properties), clicking the Driver tab, and then looking at what it says next to Driver Version. If the version available at the website of the manufacturer of the device in question is newer, then yes, your current driver is "outdated". However, whether it is really outdated and needs to be updated is another question: b. Do you really need a newer driver if everything is working just fine? Even though the driver version available on the manufacturer's website is newer, that doesn't necessarily mean you need to do an update. For example, I own an ATI Radeon 9500 Pro video card; I am using the Catalsyt 3.10 drivers, which I believe were released last December. The newest Catalyst drivers that are out are the 4.3s, but do I need to do an update? I don't think so, as everything is working fine with my current drivers. All of my games work properly and their performance is good, and I have had no issues playing back movies on my computer and such. If I was having general video issues or issues with a specific program, I might take a look at what the 4.3 driver fixes/changes and see if anything relevant to my problem(s) is in there. This is what I would recommend you do, if you think that the driver you currently have installed for a piece of hardware is causing some problems, either with your system or a specific program. Otherwise, if everything is working fine, don't fix what isn't broken. ;) If you have a driver that is grossly outdated (i.e. you have an ATI Radeon video card and you're using the Catalyst 2.5s), then I'd say go for an update. In general, I think that the most important drivers to keep up-to-date are your video card drivers, sound card drivers and motherboard chipset drivers. If you're a gamer, this is definitely something you should keep in mind.

If you're talking about an ATI video card, they were outdated yesterday... Seriously, my hard and fast rule is that I update when the whole number changes (e.g. 3.x to 4.x), or if an update has a fix/performance tweak that is useful to me. In my experience, it is usually very good to keep the motherboard BIOS as up to date as possible, for compatibility and performance reasons

I agree with Carsomyr and would add one more caveat: if the newer driver adds improved or new functionality that you want or need, give it a try. Otherwise - if it ain't broke.......don't fix it.