Upgrading the hardware in a computer will normally result in it being able to run faster, and may enable it to support newer applications that it could'nt before.
Hardware upgrades such as disk drive upgrades will mean that your computer can store more files, or CD drive upgrades may enable you to write to CDs and DVDs in order to back up your files.
Upgrading your system software (for example Microsoft Windows) may enable your computer to run the latest programs, and upgrading applications software (for example Microsoft Office) may provide additional functionality compared with older versions.