Hi Sheri!
Themes are updates related to the liquid templates and functionality they can access.
If you have made any customizations to the templates then the recommendation is if you need to update the theme (to access some new features associated with it), then you should download all your liquid templates first, update the theme in CE, then upload all of your templates (as updating the theme replaces your liquid templates. That said, it’s best to test this in a sandbox first (if you have one) as there may be some knock-on effects of updating the theme.
It’s only worth updating the theme if you need to. v2 gave us waitlist functionality for ILT sessions, and v3 provides new e-commerce functionality. Updating theme was a real pain for us, as we have lots of customizations, so I’ve avoided updating to v3. However, I don’t know what this means going forward as I don’t want to get left behind on future themes, and there’s no documentation/best practice on how to manage themes if you have customizations (e.g. can I jump from v2 to v4? And so on).
I’d err against updating theme unless you have a need to based on new features, and speak to your CSM for some tips about how to manage it.
Best wishes
Joel