things to consider:
– is you site live with substantial traffic? and you can’t afford an outage?
– do you use a lot of plugins?
– what version of wordpress you use currently?
It is generally better to upgrade to the latest version which includes performance improvements and bug fixes. wordpress 2.8 has made the admin interface noticeably faster and allows new management for widgets and themes amongst many other things.
Most of the problems that arise after an upgrade are not because of the core update, but rather from incompatibility of plugins, or not understanding the new changes.
If you rely on a lot of plugins you are more likley to have issues, since it takes a while for all the plugins to be updated if ncessary by the authors.
My 2 cents is that if you have a relatively new site, use few plugins, with little traffic for now, then its probably best to upgrade.