Well, no you don't *have* to upgrade the BIOS. Some people think it's healthy to keep it updated, others think it's an unnecessary risk unless you need to get the features in the latest version. The 1.2.3 BIOS brought the following changes <ADMIN NOTE: Broken link has been removed from this post by Dell> to the XPS 13. Next time a BIOS update comes out, you might first have to upgrade to v1.2.3 anyway, but I'm not sure about that.
Here's how to see the current BIOS version:
sudo lshw | grep -A 4 BIOS
[sudo] password for me:
vendor: Dell Inc.
physical id: 0