Microsoft Knowledge Base Article 328848 contains the following summary:

Windows XP software updates (for example, security updates, critical updates, or hotfixes) that are released after Service Pack 1 (SP1) may include binary files for both Windows XP-based and Windows XP-based SP1 computers. These dual-mode update packages are designed to install post-SP1 updates on Windows XP-based computers regardless of whether they are running SP1. If you do not have SP1 installed, the dual-mode update also puts a post-SP1 version of the update on your computer, which is automatically installed if you install SP1. If you remove SP1, the pre-SP1 version of the update is restored. A new Update Migration tool (Xpsp1hfm.exe) determines which update to install and performs the migration.