The Flash we're talking about here is Flash Player - which enables you to view all Flash content on the web. This isn't Flash the application, which is what you use to develop Flash content.
And yes, you should update it so that you don't get redirected by banner ad exploits etc. The redirection (inevitably to sites that tell you your PC is INFECTED! OMG! Download this software (trojan/virus) to fix it RIGHT NOW) is incredibly annoying even if you aren't stupid enough to download the suggested software, as often you cannot get OUT of the loop and have to quit the browser entirely.