This one line of code, put at the top of a stored procedure turns off the messages that SQL Server sends back to the client after each T-SQL statement is executed. This is performed for all SELECT, INSERT, UPDATE, and DELETE statements. Having this information is handy when you run a T-SQL statement in a query window, but when stored procedures are run there is no need for this information to be passed back to the client.
By removing this extra overhead from the network it can greatly improve overall performance for your database and application.
If you still need to get the number of rows affected by the T-SQL statement that is executing you can still use the @@ROWCOUNT option. By issuing a SET NOCOUNT ON this function (@@ROWCOUNT) still works and can still be used in your stored procedures to identify how many rows were affected by the statement.
Microsoft even realized the issue that this creates and has changed the stored procedure templates from SQL Server 2000 to SQL Server 2005.
courtesy : - MSSQLTips.com