It's only automatic app download (new purchases) - provided the app is 20MB at most while on 3G, no cap while on Wi-Fi including hopping on to other iPhone's personal hotspot.
Automatic app update isn't necessarily good,
There are instances where updated versions crash, have removed functionality, worse off, bug issues etc, compatibility issues, profile data loss etc - this is on the bad side, it does happen ocassionally where things go the opposite direction of what the release notes say.
For free apps, you don't know if sometimes the developer feel that giving apps free is really too good a deal and start adding ads etc..
Its better to read the update release notes and probably the reviews on the current version as well,
if you see a noticably large bunch of bad review like "after a game app updates, my character gets reset!!!@@" - don't update it until the developers rectify the issue.
"nooooo my news app doesn't fetch news anymore!!! *1star*" (99/100 people found this review helpful) - Like the above, don't get it.
There are issues which may not crop up during tests ran by the developers, they're just a couple of people while the consumers are a larger bunch of "testers"
However to note, if you were to see people specifically mentioning
"the update/app crashes only when I'm on an iPod Touch or iPad1!@!@!@" - especially games
And no issues with iPhone 4/4S iPad2 etc, chances are you're safe. That's because iPod touch has an underclocked processor and scaled down specs, like the iPad which may be the cause of the issues.
Hope it helps.
If you're the kind of people who wants updates and new features first hand, minimise the use to *just* apps that use little/no personalisation/profile data. Like weather apps, news apps etc. You've got nothing much to lose. In the meantime, you may also want to rollback an app to a previous version and this is how you do it.
Assuming you have the old version in your trash/recycle bin
- Restore the file to its original location, then double click it
- iTunes warns you that you have a newer version... would you like to proceed with the old one? Yes
- Delete the new version
- Delete the app on your phone - you lose your app settings
- Sync the app again - it will use the working old version
- Of course, you lose your settings