Standard obsolescence has been rated at 18 months for a number of years. Functionally speaking, most systems purchased in the last few years work admirably for most tasks.
The key determining factor in upgrading is whether or not the unit supports your needs. If all you do is surf the 'net, do e-mail, word process, and balance your checkbook (with maybe a little solitaire here and there) then you're fine -- don't bother as the bang for the buck would be limited at best. You'd be better off buying some additional memory, a larger hard drive, or a bigger monitor. Another option to consider is to do a clean install of your operating system (Windows for most folks).
If you do high end work such as CAD or other heavy graphics design then you'll want to upgrade every year or two most likely. If you are a gamer and you REALLY get into the latest and greatest then you'll want to get up to around a 2.4GHz system and the latest and greatest video card.
In my case, I'm a major technophile -- it's my business as well as my hobby. My way of upgrading is a bit atypical though -- since I build all of my systems, I upgrade in parts. For example, I just replaced my CDRW with a new Sony DVD -/+ RW drive but nothing else was changed. At the moment I think I'm running either 1.8GHz or 2.0GHz -- can't recall which offhand -- with a gig of memory, a 30G and 60G hard drive, Sony DVD +/- RW drive, the latest MS Internet ergonomic keyboard, latest MS trackball, 17" monitor (yeah, just waiting for prices on flat screens to come down a little bit more than I'll get a 21" flat screen), XP Pro and various peripherals. With the exception of the DVDRW, the last upgrade I did was a reinstall of the OS to XP Pro back in December 2001 -- I'm still flying though. :)
Bear in mind that the CPU is just one factor in the overall system. You also have memory, hard drive, CDRW/DVDRW, monitor, keyboard, mouse, video, sound, and so forth. That's what's nice about building your own system -- you can upgrade piecemeal and get the latest and greatest with what you have instead of doing a full upgrade (which won't give you ALL of the latest and greatest anyway). Since technology has outpaced function for most users, you can get by for longer then buy at less later.