Caulking above windows

Just a swag, really. The window trim should extend up behind the siding. If it's caulked, any moisture that may get behind the siding would be trapped. On the other hand, if moisture gets behind the siding, it's going to be a problem anyway.

If the window was installed correctly, the nailing flange would have been caulked to seal it before the siding was brought down to overlap the flange making caulking useless.  Since  nailing flanges are at least 1-1.5 inches wide most any "trapped" water will drain to the outside edges and down.
Older windows need to be flashed before the siding goes on and any caulking gets applied behind the top edge of the flashing to prevent water penetration

I don't see much harm in it.  Like Mark says, not really needed if the window is installed properly, but it does provide a tidy appearance.

It depends on the design of the window.  If there is a wide nailing flange and/or channels top bottom and sides for the siding to fit into no caulking is needed.  Most new construction windows are made this way if they are intended for siding.

Some replacement windows that fit into the old opening (no nailing flange) should be caulked all the way around.

IF they are PROPERLY flashed...then caulking is not needed....and may be detrimental in that it could prevent expansion and contraction of the siding.