Why Caulk? It helps seal the home’s external shell for thermal benefits. (Paint itself has been shown to raise a houses R-factor (heat retention.)) And of course, it helps make a house look its best by filling small cracks and seams that show after the final coat of paint. When a house is properly caulked it looks much newer and the surface cleaner. Caulking is necessary to fill gaps and cracks around windows and doors where the old caulk has failed.
If you add up the small 1/4" gap around windows and doors, and combine that into one area, it can be about the size of a brick. That is a lot warm or cold air lost.
Each different surface has a caulk made specifically for it. Whether you're caulking wood, masonry, vinyl, aluminum or on glass, so check with your local hardware store or painting specialist, and make sure to buy the appropriate caulk for the job. Not all caulks are paintable (silicone is not.) Get one that is. As far as caulking goes, I like to apply the caulk after priming and before the final coat of paint. This way we can easily tell which areas require attention and so the caulk can easily bond with the substrate. The caulk has much less of a chance to pull away and will last for the duration of its warrantee.
Caulk is applied to keep moisture from getting into the cracks of the siding and behind the paint, which may cause premature paint failure.
Video for demonstration of techniques.
To summarize: it is important to caulk your windows and siding because:
1.) Caulk will keep moisture out of the homes shell and keep water from getting behind your new paint job, which is a major cause of paint failure.
2.) A caulked house looks better. It has a smoother appearance and large cracks will not detract from the quality of the paint job.
3.) Thermal benefits. Caulking helps keep a house warm in the winter and cool in the summer. It's actually one of the cheapest ways to add energy efficiency to your home.