I know Blender is free software and bugs happen. But my question is, is it good practice to update Blender every time there is an update? Even if a minor one? (i.e I'd consider 2.56 to 2.56b minor or even 2.63, no?)
I haven't been updating very often for fear that updating frequently causes issues like broken settings, non-compatibility or lost user configs?
Or is updating often recommended to keep up to date and adapted to the new changes, i.e like upgrades in the GUI and functionality?
Blender is very compatible between versions, both backwards and forwards (with the exception of the upcoming 2.7, which is supposed to have minor compatibility breakage).
For lost configs, Blender should prompt you to use your old config after you start the new version, but if it doesn't it's very easy to transfer (and keep backups, etc.). See this post for details.
The a and b releases are relatively minor bug fix releases usually only released when major bugs are found shortly after the initial release. In spite of being relatively minor releases, you probably want to use them instead of using the previous release (which has some bug bad enough to justify another release).
It is of course up to you, depending your habits and what works for you, but I highly recommend staying with the latest stable releases. However, expect to find bugs if you use any development versions.
Some extra information you may find useful:
You can have multiple versions of Blender installed simultaneously, which may be of use if you want to try the new version without removing your current version.
To install another version along side your current version:
Download blender using the archive (*.zip, *.tar.bz2). The archive gives you a completely portable version of Blender which you put and run anywhere (even a USB drive) without any installation.
Extract the archive into some directory (the archive extracts into a new subdirectory).
Run the blender executable located in the extracted directory.
Note that portable Blender will use the config of the system version of Blender (if there is one) by default. If you want to have separate configs, create a directory called config in $directory_from_extracted_archive/2.69/ where 2.69 is the version of Blender you extracted.
If you do find a bug, report it! The developers are usually very responsive (I have had reports fixed within a couple of hours).
Don't assume someone else will report it if you don't (but do check to see if it's already been reported before you report it, just in case).
Gandalf3's answer is spot on. My only contribution would be: Wait a few days to see what bugs may have made it pass an initial release. On our production we usually ask one or two people to test out the RC (release candidates) before we move up. What you earn in moving up is quite valuable (faster render times, 2.7 is looking to improve animation speeds.)
All this being said, Blender is one of the most well written, back-compatible pieces of software out there. Moving up is no problem.
a and b versions).
$\endgroup$
2.63 was another version that broke backwards data compatibility (adding bmesh).
I would say always update to an a or b version as they are specific bug fixes that are considered show-stoppers found after release. The fix is important enough to do an extra release for that version, the bug fix is the only change from the previous release. Other versions could be skipped if they don't add any new features that you would want to use.
Possibly the biggest area of compatibility breakage between versions has been with python scripts - this is happening less though. If you have any scripts you rely on you may want to test them in a new version.