Difference Between Item.Update and Item.SystemUpdate?

When I use Item.Update there is an error while updating the item, producing the following trace: Name :XYZ.xml Microsoft.SharePoint.SPException: The file ABC/EFD/CC Approver 1/XYZ.xml has been modified by SHAREPOINT\system on 08 Jan 2015 10:28:56 -0800. ---> System.Runtime.InteropServices.COMException (0x81020037): 0x81020015The file ABC/EFD/CC Approver 1/XYZ.xml has been modified by SHAREPOINT\system on 08 Jan 2015 10:28:56 -0800. at Microsoft.SharePoint.Library.SPRequestInternalClass.AddOrUpdateItem(String bstrUrl, String bstrListName, Boolean bAdd, Boolean bSystemUpdate, Boolean bPreserveItemVersion, Boolean bPreserveItemUIVersion, Boolean bUpdateNoVersion, Int32& plID, String& pbstrGuid, Guid pbstrNewDocId, Boolean bHasNewDocId, String bstrVersion, Object& pvarAttachmentNames, Object& pvarAttachmentContents, Object& pvarProperties, Boolean bCheckOut, Boolean bCheckin, Boolean bMigration, Boolean bPublish, String bstrFileName, ISP2DSafeArrayWriter pListDataValidationCallback, ISP2DSafeArrayWriter pRestrictInsertCallback, ISP2DSafeArrayWriter pUniqueFieldCallback) at Microsoft.SharePoint.Library.SPRequest.AddOrUpdateItem(String bstrUrl, String bstrListName, Boolean bAdd, Boolean bSystemUpdate, Boolean bPreserveItemVersion, Boolean bPreserveItemUIVersion, Boolean bUpdateNoVersion, Int32& plID, String& pbstrGuid, Guid pbstrNewDocId, Boolean bHasNewDocId, String bstrVersion, Object& pvarAttachmentNames, Object& pvarAttachmentContents, Object& pvarProperties, Boolean bCheckOut, Boolean bCheckin, Boolean bMigration, Boolean bPublish, String bstrFileName, ISP2DSafeArrayWriter pListDataValidationCallback, ISP2DSafeArrayWriter pRestrictInsertCallback, ISP2DSafeArrayWriter pUniqueFieldCallback) --- End of inner exception stack trace --- at Microsoft.SharePoint.SPGlobal.HandleComException(COMException comEx) at Microsoft.SharePoint.Library.SPRequest.AddOrUpdateItem(String bstrUrl, String bstrListName, Boolean bAdd, Boolean bSystemUpdate, Boolean bPreserveItemVersion, Boolean bPreserveItemUIVersion, Boolean bUpdateNoVersion, Int32& plID, String& pbstrGuid, Guid pbstrNewDocId, Boolean bHasNewDocId, String bstrVersion, Object& pvarAttachmentNames, Object& pvarAttachmentContents, Object& pvarProperties, Boolean bCheckOut, Boolean bCheckin, Boolean bMigration, Boolean bPublish, String bstrFileName, ISP2DSafeArrayWriter pListDataValidationCallback, ISP2DSafeArrayWriter pRestrictInsertCallback, ISP2DSafeArrayWriter pUniqueFieldCallback) at Microsoft.SharePoint.SPListItem.AddOrUpdateItem(Boolean bAdd, Boolean bSystem, Boolean bPreserveItemVersion, Boolean bNoVersion, Boolean bMigration, Boolean bPublish, Boolean bCheckOut, Boolean bCheckin, Guid newGuidOnAdd, Int32& ulID, Object& objAttachmentNames, Object& objAttachmentContents, Boolean suppressAfterEvents, String filename, Boolean bPreserveItemUIVersion) at Microsoft.SharePoint.SPListItem.UpdateInternal(Boolean bSystem, Boolean bPreserveItemVersion, Guid newGuidOnAdd, Boolean bMigration, Boolean bPublish, Boolean bNoVersion, Boolean bCheckOut, Boolean bCheckin, Boolean suppressAfterEvents, String filename, Boolean bPreserveItemUIVersion) at Microsoft.SharePoint.SPListItem.Update() at Edwards.Global.JDAExtractor.Program.<>c__DisplayClass2.b__0() at Microsoft.SharePoint.SPSecurity.<>c__DisplayClass4.b__2() at Microsoft.SharePoint.Utilities.SecurityContext.RunAsProcess(CodeToRunElevated secureCode) at Microsoft.SharePoint.SPSecurity.RunWithElevatedPrivileges(WaitCallback secureCode, Object param) at Microsoft.SharePoint.SPSecurity.RunWithElevatedPrivileges(CodeToRunElevated secureCode) at Edwards.Global.JDAExtractor.Program.Main(String[] args)

While searching for answers, many people suggest to use Item.SystemUpdate instead. What's the difference between Item.SystemUpdate and Item.Update?