SQL Server uses statistics to understand the distribution of data in columns. These statistics help the query optimizer estimate the cost of different query plans and choose the most efficient one. Over time, as data changes (insertions, updates, deletions), statistics can become outdated, leading to less accurate cost estimations and potentially slower queries. Updating statistics ensures the optimizer has the most current information, improving query performance. This is especially important for frequently queried tables or tables with significant data changes. Failing to update statistics can lead to suboptimal query plans, resulting in performance issues. The process is relatively straightforward and can be scheduled or triggered automatically.