hi koza,
ok here goes.....
the software that is installed in older s60's is designed for the cars much earlier on after a lot of research and testing etc at volvos labs,however they cannot fully simulate how the cars will react later on in their lives when they have 20k miles on them and are running in adverse conditions or different climates etc. so as volvo recieve reports from their dealer network about problems with the cars then volvo develop new updated software that has improved "fixes" that takes cars of certain problems like to improve driveability or coldstart problems or trans shifting problems etc etc.........
an example of this is companies SUCH as volvo developing engine software that runs the motors very lean so that they can pass emission standards ,then later on they find that the lean running means they are real hard to start when cold and causes surging or lack of power,so then after feedback from dealers new improved software is developed to fix this.
in some cases there are actual faults with older software that never showed up during the testing phase of the cars development and this is fixed with an update.
the actual content of the software or wether or not you will get an update is entierly at the dealers discretion and is not done as a matter of course.
either way in a warrenty situation you dont have to pay or worry about whats going on as long as your dealer sorts it out for you.
hope this explains things a bit.

steve.