SPListItem.Update() is used to update all the values in SharePoint List Item including Modified Date, Modified By, Version fields.
SPListItem.SystemUpdate() is used to update the values of the listitem without modifying the Modified Date, Modified By and Version fields.
SPListItem.Update() . Event Receiver is fired in case if listitemupdated,listitemupdating event is associated.
SPListItem.SystemUpdate() Event Receiver won't be fired in case if listitemupdated,listitemupdating event is associated