Question

I read several times to convert the timestamp to any readable format but I am not able to decide when to use timestamp datatype or datetime datatype to keep track of records inserted or updated in database in sql server 2008.

Answer 1

timestamp is deprecated, do not use this type. Its role has been replaced by the rowversion type, which is a synonym for timestamp:

The timestamp syntax is deprecated.
This feature will be removed in a
future version of Microsoft SQL
Server. Avoid using this feature in
new development work, and plan to
modify applications that currently use
this feature.

As a type, timestamp (and rowversion) has absolutely no relation to dates, time or anything chronological:

The rowversion data type is just an
incrementing number and does not
preserve a date or a time.

If you need to track the time when a record was inserted or updated, use DATETIME2, at the desired precission.