[From: firstname.lastname@example.org (Jeff Abramson)]
Overclocking is a term generally used to describe how you have increased the clock frequency on your board to run your system at a higher speed. For example, if you plug a 25MHz i486 into a board that is configured to run a 33MHz i486, then you are overclocking your CPU. Most boards allow you to configure your clocking via jumpers, and others require a new clock oscillator.
Although users have had success with overclocking, it is a dangerous practice for two reasons. First, the chip has been designed to meet a certain speed. Therefore, some circuits do not have the margin to operate at a higher frequency. The chips coming from a wafer have various speed specs (statistical distribution), so you may be lucky and own a CPU that has the circuit margins you need to overclock. But you don't know - and if you overclock, you may get data failure. The data failure may be reproducable - and therefore avoidable, but most likely not.
Second, you have reliability concerns when overclocking. Overclocking means faster frequency, which means more current and power. This can lead to real failures in your CPU. Electromigration is one such failure where metal lines in your CPU will actually break or connect if they get too much current. This is irreversable, and most likely not covered under warranty.
So when can you overclock? Really only if you don't care about burning out your CPU and you don't care if you get wrong data every now and then. If you own a machine and you use it just for games, then overclocking may be something to try - and you simply upgrade to a new CPU when you burn out the current one. Otherwise, it's not worth the small performance gain.