.NET is basically an interface that manages programming, allowing quicker and more secure program development - the downside is that the programs must run in a .NET environment rather than natively in Windows, which slows things down somewhat.
Windows 7 comes with .NET 3.5 built-in. .NET v4 or 4.5 have to be installed later for some extras or applications to work properly.
.NET updates generally appear to create more problems than other updates - possibly because people are a little impatient. Many times, after installing a .NET update, then system will request a reboot, and after the reboot will be slow to respond for a few minutes while the .NET update finishes 'optimising' the installation. I suspect that many of the problems are caused by people crashing the machine and rebooting during this phase, causing problems in either registry or file system.