It will generally have an effect on machiens with more than 4 processors. This allows the processor to run more efficiently since its onboard cache does not have to be purged of data as often. It should also only be set in extreme cases and only long enough to correct a problem. The system tables contain all of the information about your environment such as databases, users, configuration options, etc. This information is added to the system tables in a variety of manners, but generally when creating an object.
Some information is entered using system stored procedures.
These are the only two methods that should be used. Normally, you can not issue direct SQL statements such as insert, update, and delete against the system tables. By turning on allow updates, you give the ability to directly modify the contents of the system tables. If someone issues an incorrect statement while this option is turned on, you will find yourself scrambling for the most recent backup. Only turn this option on when directed to do so my Microsoft technical suport or as a last resort to fix a problem.