The firmware is the operating software of the phone. So, to answer your question, yes that is needed software otherwise your phone would not be able to operate. However, you don't need the latest version, but if you want to have the latest features and functionality of the iPhone, you would need to upgrade to the most current version which is 3.1.2. You would do this by connecting your iPhone to your computer and clicking on the "Check for update" button in the iPhone summary tab.
If you are jailbroken, however, I suggest you do some searching on these forums to find out what you need to do in order to back up all of your jailbroken goodies before you upgrade firmware. However, since you're new to iPhone, my guess is you're not jailbroken therefore I suggest you look into it because it's very easy and very neat.
As far as your second question goes, I have no idea what you're asking, haha. Please rephrase it. Thanks.