What is the baseband and do i need to update mine?
The way I understand it is that the baseband or radio partition is firmware used by the baseband processor, which is physically different from the application processor. The BP also has its own RAM and communicates with the android kernel via a process called the RIL (Radio Interface Layer).

When you install/update a new ROM this should not touch the baseband. So if your android ROM is having trouble communicating with the cellular hardware, the RIL part of the kernel might be to blame. This may be because the newer RIL expects  a more modern baseband version. 

So basically your baseband becomes an outdated dependency if you upgrade your ROMs long enough. To fix either downgrade the ROM (Kernel) or upgrade the baseband. Note there are risks involved with flashing the baseband. See also What is radio.