Many Linux operating systems offer the ability to upgrade to a new version of the OS without wiping the hard drive and reinstalling. On a dedicated server, you might call this an in-box upgrade. Generally, a new version of your Linux distribution will include a newer kernel version and newer software. Is such an upgrade worth the risk?
First, it is important to understand what will happen when you upgrade your system. Generally, updates will install patched versions of your software. In some cases, you may even see slightly newer versions. An upgrade will install the latest version of your distribution, which usually has much later snapshots of your software. You might jump a whole version in Apache, PHP and other mission-critical applications. This can be risky.
You also need to consider how much maintenance time you will need for such an upgrade. You will have to dedicate a significant amount of resources to downloading and installing packages. It could take hours or even an entire day depending on network traffic.
Finally, it boils down to value vs. risk. A new upgrade may give you newer software but it might not be enough of a change to warrant the risk. The only situation in which an upgrade would be absolutely necessary would be when your OS will not longer be supported and receive security updates from the developers. In that case, an upgrade is a must.