When you buy the game it doesn't have any new updates on the disc so that is why you are required to download updates / patches. Dead Island is a perfect reason why a patch is NEEDED to play the game cause if you ignore the patch your game won't function properly which is why they had people download the new patch so it would solve issues like freezing or the major problem was the save issue which the original game version 1.0 hardly saved when you wanted it to.
Installing game data is required on PS3 and here's why. Try playing Tekken 6 on PS3, do you notice that when you play the game the load time takes a long time to load between matches? That's because the game is loading from the disc so it takes longer and longer to load the game. Tekken 6 lets you install the game data onto your system, so when it's installed you will see a huge improvement between loading times.
Sometimes you won't see much of a difference on a game that forces you to install like GTA IV. Since the game installs right when you press play on the disc, you are forced to install it. But do you know why most games on the 360 give you an option to install? Cause their disc is DVD while PS3 is Blu-Ray. DVD's are easier to read and load faster than Blu-Ray discs.
So in the end if you want your game to run perfect without issues a patch / update is REQUIRED. If you don't want to wait 20 minutes for loading, a game data install is REQUIRED...