Answers

1. The three methods are heuristics, virus definitions and on-access scanning.
2. If you don't update your antivirus software, you are more likely to be infected with malware because your antivirus will have a harder time detecting malware.
3. As more and more advanced froms of malware are released, more and more advanced forms of antivirus will be needed to stop the spread of new and advanced malware. This is an arms race as each side is trying to be more advanced than the other in terms of cyberweapons.