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Unlike Windows XP service pack 2, which included significant security updates, or Windows XP service pack 3 which is required for support from Microsoft, Windows 7 service pack 1 does not have any significantly compelling updates for most users. If you do not regularly use automatic updates to keep your operating system up to date, then it is a good idea to install Windows 7 service pack 1 to get your operating system caught up on the security patches that are included in the service pack.
If you are a business user then it makes sense to start testing the service pack to ensure compatibility with all of your office software. If you are a home user you might want to wait a month or two and see if any problems crop up, assuming you are up to date on your security patches.
Personally, I decided to just jump in and install the service pack. I really haven’t noticed anything different on my system. Microsoft has a page about how to install Windows 7 SP1, but I didn’t look at it until long after I had installed. In fact the only reason IO looked at it was so I could tell you where it is in case you do want to read it! The page is at http://technet.microsoft.com/en-us/library/ff817622%28WS.10%29.aspx
So the answer to the question really is that it is up to you. If the service pack fixes something you have had problems with, then install it. If the service pack adds some functionality for you, then install it. If there are no compelling reasons, then take your time, but eventually you will need to install it when support for Windows 7 without the service pack is discontinued.
Director of Technical Education
Cyber Threat Analysis Center
ESET North America
Author ESET Research, ESET