I am thinking about upgrading the firmware on the Raspbery Pi 512 using rpi-update. However, I can't figure out what updating the firmware does. Does it make the Pi more stable? Or faster? I can't seem to find an answer about it.
rpi-update updates the kernal and firmware of your Raspberry Pi to bleeding-edge. Eventually the kernal and firmware form bleeding-edge makes it to sudo apt-get upgrade. You should not need rpi-update unless trying to do something such as usb boot.
It updates the kernel and firmware. It is just a script, take a look at it.
Take a look at this for an example of what rpi-update does. I use it to update my pi's to the latest kernel all the time and have never had an issue.
I think a lot of people are getting this confused. When we speak about "firmware", we mean something similar to a BIOS update, where the new code is permanent, even after a power off, sd card removal, etc. "Software" is something like the OS, Windows, or other code on the SD card that are run by the system.
To MY knowledge, it sounds like there is no actual "firmware" that can be updated/changed. The ONLY modifiable code is located on the SD card. All of the code in the on-board hardware is hard-coded, and NOT updatable.
If I'm wrong, please correct me, as I was hoping there would be some microcode updates, or similar for the Pi3B+ (and others)