Holy cow, I wrote a book!
By default, the Background Intelligent Transfer Service (BITS)
which is used by Automatic Updates
will use idle network bandwidth for downloading updates.
This is normally not a problem.
One case where it can be a problem is
you have a large LAN that shares a single DSL connection.
BITS doesn't see that that DSL connection is shared.
Consequently, each computer on the LAN will be using its
idle network bandwidth to download updates and the total
of all the LAN computers doing this will
oversaturate the DSL connection.
[Typo fixed. 31-Jan-05.]
Another example where this can be a problem is if you have a
network card that connects to a hardware firewall which in turn uses
a dial-up modem to connect to the Internet.
(For example, you might connect through a classic Apple AirPort
which is in turn connected to a modem.)
BITS sees your fast network card and can't see that there is
a bottleneck further downstream.
As a result, it oversaturates the dial-up connection.
To tweak the BITS settings, you can fire up the Group Policy
Editor by typing "gpedit.msc" into the Run dialog. From there,
go to Computer Configuration, Administrative Templates,
Network, then Background Intelligent Transfer Service.
From there you can configure the maximum network bandwidth
that BITS will use.
You can even specify different BITS download rates based on
time of day, so that it downloads more aggressively while you're
sleeping, for example.