Anything that install a shell extension requires a restart to update, since there is no way to force its DLL(s) to be unloaded from all the other programs.
For example, any program which shows a File-Open dialog will have dopuslib.dll loaded, and there's no way to make it unload it except restarting the program or the computer. (Well, the login session. Technically, the computer itself doesn't need to be restarted, except that the copy-on-reboot mechanism in Windows is tied to reboot and not login.)
Same reason (or one of the reasons, at least) Adobe Reader and TortoiseSVN require restarts (for example).
There is a restart manager in newer versions of Windows that allows installers to ask apps to restart without requiring a reboot, but it only works with the handful of apps that opt-in to that mechanism, so it's pretty much useless for stuff like shell extensions which are loaded into almost everything.