In computer jargon, to slipstream updates, patches or service packs means to integrate them into the installation files of their original software, so that the resulting files will allow a direct installation of the updated software.
If not directly supported by the software vendor, slipstreaming can be technically possible, depending on the updates, the structure and type of the program to be slipstreamed and of its installer, if any.
In Windows environments, it is common for system administrators to make slipstreamed installation sources of the operating system available on network shares. That greatly simplifies deployment for new installations. Microsoft also usually allows ordering slipstreamed CDs from their website. Newer versions of Microsoft products usually come either already slipstreamed or with a separate CD holding some updates.
Slipstreaming can save time and money. It is possible to add service packs and other updates and patches to the install source, as well as extra drivers. In a Windows environment, slipstreaming all needed drivers onto the install source will save time downloading them from the Internet. However, if newer drivers are available then a new install source would be needed. It also involves more work initially, but can save time later on in reinstallation terms. This is especially significant for administrators that have to manage a large number of computers, where the default case for installing an operating system on each computer would be to use the original media and then update each computer after the installation was complete, as opposed to using a more up-to-date (slipstreamed) source, and having to download/install a minimal number of updates.
Adding patches to the install source is also another time saver. However, not all (Windows) patches can be applied in this fashion and one disadvantage is that if it is discovered that a certain patch is responsible for later problems, said patch cannot be removed without using an original, non-slipstreamed install CD. Online instructions for this way of doing things emphasise the use of virtual PC environments (such as VMware Workstation or VirtualBox) for testing, as the end user often gets no support from the program manufacturer for using these "homemade" CDs.
Using slipstreamed OS CDs (e.g. XP Pro) can avoid installation errors caused by drivers and hardware components.
By downloading the patch/update/hotfix from the OS provider it can be simply burned to a new CD with the installer and it will be installed with the OS
See also 
- Build an XP SP3 Recovery Disc - From pcmag.com/
- Automatically Slipstream Windows XP with SP3 and All Post-SP3 Security Hotfixes with a Single Command - From smithii.com
- How to slipstream Windows XP with SP3 - From HelpWithWindows.com
- Installing SP1 and updates with Windows Server 2003 - Microsoft Article about integration of Service Packs and hotfixes into Windows Server 2003
- Slipstream Windows Vista Service Pack 1 - From HelpWithWindows.com
- Slipstreaming Windows XP with Service Pack 3 (SP3) From Paul Thurrott's SuperSite for Windows for slipstreaming to Windows SP3. (Current as of December 11, 2011[update])