Hi Chris. I read the article in that link Bob provided and I believe I understand what is going on.
When SP2 was introduced, some years ago now, it caused problems in some machines with software that caused them not to run. The article provides 3 error messages users may have seen, to do with memory or storage errors.
It seems Microsoft has hunted this error down and found it applies to changes made by installing SP2. The {potential} problem may still exist, even for those users who, like you, are up to date with Windows Updates and installed SP3 and others afterwards, hence this Windows Update. Microsoft called it xpsp2res.dll simply to signify that it "resolves" problems created by installing SP2. That is an assumption by me because I don't know Microsoft's method of naming files and updates.
It seems that, prior to this general release of the fix, Microsoft offered Hotfixes for those users who reported the problem. But now Microsoft has incorporated the fix into a Windows Update. I am assuming, (sorry, a lot of assumptions), that being a DLL file it is intended to be called by the OS whenever such a problem exists, although it might even replace an existing file on the system with an updated and corrected DLL.
I have always trusted Microsoft Updates on all my Windows machines even if I don't really know what they are or what they are for. It is just too complicated for me to understand, 
That said, I have, on the odd occasion, created a System Restore point before installing some updates if there was a slight concern in my mind. Windows Vista and Win 7 always creates SR points beforehand anyway, but I never quite trusted XP to do this all the time, so that is why I created a manual SR point.
Also, XP allowed us to visit the Windows Update web site to view updates and see whether they were noted as security, or critical, or optional, and to 'hide' updates if we wanted to. I'm not sure if XP still allows that, (Start menu > Windows Updates), as Vista and Win 7 did away with that option.
In this case I would suggest to trust Microsoft and apply the update. You may not have experienced any problems as said by Microsoft so far, but we can't say that you never will, especially for any new software you install, and so this can be treated as a preventative measure.
I hope that helps, but any problems come back and we will help.
Mark