Security
The very most important reason for updating Windows 10, or any software for that matter, is to fix critical security issues.
Of course, given the nature of software, as old bugs are fixed, new ones are introduced, so you always run the risk of updating to a less secure version than what you had before. However, generally speaking, the security improves over time. If you decide not to update the software you use, which is something you can do with practically any piece of software, including Windows 10, the chances of your system having a significant, publicly known vulnerability increase over time, quite rapidly. There are many places with a very rigid infrastructure (i.e., financial and medical institutions) that often suffer very serious damages from relatively primitive attacks simply because they do not keep their software up-to-date. Contrary to popular belief, every hour matters, which is precisely why Windows 10, to their users' great displeasure, force updates to be installed ASAP.
Software at the level of operating systems is so vastly complex that it is practically impossible to keep it perfectly secure and without bugs.
This is why running important software with discontinued support is very risky, even though the diehard Windows XP and 7 fans would have you believe otherwise. There are so many publicly known exploits related to just slightly outdated operating systems and low-level services that if you are connected to the Internet, you may as well assume that your system was compromised.
Many people blindly rely on anti-malware, but when it comes to the vulnerabilities I mentioned, it is utterly useless and only gives you a false sense of safety. When a new kind of exploit emerges, it takes the anti-malware companies quite some time to figure out how to detect it. It is very much possible that an update with a fix to the vulnerable software is available before the malware can even be detected, assuming there is any malware to detect, to begin with.
Performance/Stability
As software and hardware develop over time, all sorts of drivers, services, middleware, and libraries need updating to allow the best possible performance. Oftentimes, a driver update can improve the performance of older hardware simply because it introduces an optimization they have not thought of before. Most of the Windows 10 updates are not really updates to the core of the operating system, but rather updates of the accompanying software, typically with the intent of improving performance, stability, security, or all of those. These, at least in theory, do not typically require any interruption of the user's workflow (read: system reboot), and they can be just as important as core updates.
The "feature" updates are a bit harder to justify, but it is all in the name of, presumably, a better user experience.
Versioning
Finally, yes, Windows 10 were always supposed to be the somewhat final stop for the Windows line, at least for a while. They were advertised as such since as far as I can recall. If I were to guess, Microsoft has figured out that most people do not care about operating systems and could not be bothered to upgrade on their own, so the only time they buy a license is with a new computer. This way, they can save effort by selling and supporting just one major version of an operating system, which kind of further reduces room for bugs.
