There's a great explanation about how Windows handles different kinds of releases and in this Windows Updates and Hotfixes post.

I find this interesting because there are many obvious and non-obvious trade-offs that go into designing the servicing model for a product and the associated branch management. There is maintenance work, coordination work, degree of parallelism that can be achieved, testing work, compatibility concerns, deployment flexiblity, and so on and so forth. Branch management in consideration with all of these forces is not a topic that comes up very often, so all shared thinking is always welcome.

Most products can probably get away with a lot less sophistication, thankfully.

Finally, terminology for updates is defined in http://support.microsoft.com/kb/824684, which is always a generally useful thing to know.

Enjoy!