This topic has been covered a billion times already so search will give you more info but here's my basic take.
iMacs run a bit on the hot side.
They feel hot. This is normal - it's how they expel heat from the insides. iStat or similar should be your guide, not your fingers.
iMacs are well designed. If you use your iMac "normally" and expect it to last a "normal" lifespan you should forget iStat exists.
If you use your mac for heavy lifting for long periods, and/or you use Windows a lot, and/or you game in Windows, and/or you want your iMac to last into the 3-5 year bracket rather than the more normal 1-3 year one, then and only then you might want to consider the manual heat-management options available.
You can use iStat or iStat Pro to monitor temperatures. Most of your components, CPU, GPU and the like, are rated for very high temperatures indeed; temperatures you should never get even close to bar fan failure or similar dramatic hardware error. The most vulnerable component as a prev poster noted is your internal HD. Heat does, as noted above, kill. Which means, more soberly, sustained high temperatures will reduce the lifespan of your hard drive/make hard drive failure more likely.
Exactly what temperatures, opinions vary. Frankly, in this post-Timemachine era, everyone should be making frequent backups anyway. But that aside. From my reading of the bazillion posts I average it out that over 55 C for the HD is bad, and I personally try to keep it at around 50 C or under when I can. (When gaming, with fan management as outlined below, I end up with temps between say 50 and 55 C - not ideal in my book but it's not like I game 24/7.)
Note spiking in temps is ok, what we are talking about here is encoding video or marathon Halo sessions or whatever where the temps are high, regularly, for extended periods.
So, presuming you are concerned about your HD, and your usage is on the heavy side, there are a number of apps which allow you to manually manage your fan speeds. They work in different ways, the one I use(d) on my iMac, smcfancontrol, allows you to set profiles with different speed settings for each fan. I have a gaming profile which kicks up the fan speeds a little, and a Windows profile which kicks up the fan speeds quite a lot for when I'm gaming Windows-side.
Many people get paranoid about temperatures. Try to avoid this. The iMac is designed to expel heat, and you probably will be upgrading your hardware before your HD splutters, and anyway you have regular backups.
But, if you do use your machine for "pro" work, or if you game a lot, or if you are into granular control, iStat and smcfancontrol (or similar) are options which work well.
Final note, some people say these apps run the risk of wearing out your fans. That's true I guess, the question is which do you want to loose, your HD or your fan/s. Not that I'm a hardware type but I don't think the fans are especially fragile. But anyway its something else to consider.
Oh one last note: ambient temps seem to make a big difference, or at least a lot more difference than I would have guessed anyway. Where I live in Japan has a fair temperature variation between winter and summer and there is no question at all that internal temps are significantly lower in winter.
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