In an email to Microsoft Beta testers, Microsoft has outlined their release of Windows Installer v3.0 (MSI 3.0) Beta 2.
The Windows Installer service defines and manages a standard format for application setup and installation, and tracks components such as groups of files, registry entries, and shortcuts. Windows Installer is a system-resident installation service that provides consistent deployment, enabling administrators and users to manage shared resources, customize installation processes, make decisions on application usage, and resolve configuration problems.
Windows XP SP2 Beta 1 natively supports Windows Installer v3.0 / Beta2 so users of SP2 need not worry about installing this update.