That is right, RoofingGuy, I clicked "Accept" after having read the words you quote.
I then disabled the automatic updates, thinking that SmartWare would probably not ask for internet access. However, it kept on doing so. And the text you quote is only about "updates". I reckon that when the WD Disk Manager Status (wddmstatus.exe) tries to connect every other second to the internet, it is not looking for updates... and if it is, it should say so, as SmartWare itself sometimes does.
And to answer your question, the reason I installed SmartWare is to be able to use the data encryption solution. Something else that I regret with this drive is that it is apparently necessary to use the "WD Disk Manager Status" tray icon to safely disconnect the drive. When I plug it on a computer where SmartWare is not installed, I can unlock it all right and work with my files, but the LED keeps on blinking after I disconnect the drive with the usual "Safely remove hardware" tray icon. I'd expect the LED to go out, though. I then have to unplug the drive while it is still blinking. If there is a better way to proceed, I'd be happy to know.
It all may look like small details, but to me it is not : when using an external drive to back up your files, you need to feel 100% safe and in control. I can't say I do, unfortunately...