if ur wii is hacked before, but u r still not sure what u are doing, tell modmii your wii is a virgin even though it isn't
this will update your softmods, not necessarily your firmware. You have the option of selecting 4.1, 4.2 or 4.3. There is no benefit to being on any lower firmware anyways.
it will update all your IOSs, so u can play all the latest original discs from the disc channel. It will get ur wii prepped and ready to play backups off a hard drive. It will help u install brick protection and make a nand backup, it will also help u install system menu hacks to block updates and things like that. It will even help u install themes, or get s/uneek working. Basically, it does it all.
a cIOS is a custom IOS, when launching games from backups, u generally use a cIOS. If you haven't updated your cIOSs in awhile, u will see that ModMii's recommended cIOSs will be a lot faster than what you're used to, and are compatible with more games