XrayMan
I have Win 7. It say's it's an "Important" update. Not the "Optional" one. Usually Nvidia drivers are under "Optional".

 
I don't necessarily feel it's an 'important' update regardless if Microsoft feels that way. Windows 7 included WDDM 1.1 as part of the OS already. This is just some additional features to be included. WDDM 1.2 is imbedded in Windows 8 when it went RTM and is not able to be removed. Here is essentially what was involved in the two additions for WDDM as it's essentially the Windows Display Driver Model:
 

WDDM 1.1

Windows 7 supports major additions to WDDM known as WDDM 1.1; the details of this new version were unveiled at WinHEC 2008. New features include:

• DXGI 1.1, which features return of hardware 2D acceleration for use by GDI (but not GDI+) and Direct2D/DirectWrite
  • BitBlt, StretchBlt, TransparentBlt
  • AlphaBlend, ColorFill
  • ClearType font support
• Direct3D 11 Device Driver Interface (DDI)
• DXVA-HD DDI
• Hardware video overlay DDI
• Optional AES 128 encryption
• Optional decoding of encrypted video content
• Support multiple drivers in a multi-adapter and multi-monitor setup

Hardware acceleration of GDI and Direct2D/DirectWrite operations helps reduce memory footprint in Windows 7, because DWM compositing engine no longer needs to keep a system memory copy of all surfaces used by GDI/GDI+, as in Windows Vista.
DXGI 1.1, Direct3D 11, Direct2D, and DirectWrite were made available with Windows Vista Platform Update; however GDI/GDI+ in Vista continues to rely on software rendering and the Desktop Window Manager continues to use Direct3D 9Ex.
WDDM 1.1 drivers are backward compatible with WDDM 1.0 specification; both 1.0 and 1.1 drivers can be used in Windows Vista with or without the Platform Update^.

WDDM 1.2

Windows 8 includes WDDM 1.2 and DXGI 1.2. New features were first previewed at the Windows BUILD conference and include performance improvements as well as support for stereoscopic 3D rendering and video playback.
Other major features include preemptive multitasking with finer granularity (DMA buffer, primitive, triangle, pixel, or instruction-level), reduced memory footprint, improved resource sharing, and faster timeout detection and recovery. 16-bit color surface formats (565, 5551, 4444) are mandatory in Windows 8, and Direct3D 11 Video supports YUV 4:4:4/4:2:2/4:2:0/4:1:1 video formats with 8, 10, and 16-bit precision, as well as 4 and 8-bit palettized formats.
WDDM 1.0/1.1 only allows rudimentary task scheduling using "batch queue" granularity; improvements to multitasking, as well as fast context switching and support for virtual memory, were initially expected in WDDM 2.0 and 2.1, announced at WinHEC 2006.

They 'why to install' is if you want the additional features for the updated WDDM or if/when something requires it. They have it set for 'important' to head off compatibility issues perhaps. As it was originally marked 'optional' when I saw it back a while ago it would appear there wasn't a real justification for Windows 7 to necessarily need the update. Mileage varies on the functionality of the update depending on if the application (in normal cases games) need the extended functionality of the WDDM to perform the tasks necessary. Windows 8 introduces features which are not available under Windows 7 (at least at this time) for DirectX 11.1 which will not currently be ported. These updates help some of the streamlining of certain current functions but in some comparison screen shots I have seen on before/after implementing this change it didn't appear to greatly affect much for the display and in some games it fuzzed some sharpness for certain areas. I'm still on the fence about this update and have it marked 'hidden' currently.