IOS are the System files of the Wii. They are always running and are the "firmware". They run on the ARM processor and basically control input and output, making things simple for code running on PPC processor (games, System Menu, homebrew). They also have the security system, to prevent unsigned code being run.
cIOS or Custom IOS are basically patched versions of these IOS. They may have limitations removed (e.g. security features, to make stuff like custom channels possible), or may have custom "modules" added, to increase functionality (e.g. add USB2.0 functionality). Most cIOS are created purely for piracy.
As for updates: Almost all IOS are updated at every System update, as well as the System Menu being updated. This is because...