Full cycle is usually when I feel that my current computer just isn't cutting it speed wise. Usually games and applications are the sign. It isn't just one game, but if all of the newer games won't run at medium settings on the 22" or if Photoshop, Lightroom, or whatever app I need to run fast is feeling sluggish, I really start to think about it. Any upgrade at that point has to be "significant." I know that is vague, but that is how I do it. I will look at the mainstream components, not top of the line, and see if that part will get me a significant increase in my experience. To me that isn't anything less than 50% increase for most things.
I also try to make smart decisions. For instance, right now for building my new machine, getting a Core 2 Duo for $120 vs. a Core 2 Quad at $220 doesn't make sense because I know I will want to upgrade to the quad in a year (my uses take advantage of quad). Even if the quad drops to $100, it still would have just been better to get the quad in the first place and enjoy the speed for the whole time. Core 2 Quad vs. Core i7 has been a little harder for me to decide, but right now I'm going to go with the Quad because it will give me a machine that will meet what I need for the next years and the extra $200 to get the DDR3, X58, and 920 just didn't seem worth it now, although I could change my mind... =)
SSDs are the thing I am most anxious about. I do a ton of HD intensive stuff, so I am looking forward to them getting those at the mainstream level with good read/write performance.