I'm definitely in the camp that consideres an outdated computer to be the one that can't handle what you wanted to do. However, since $$ is the big factor, I usually upgrade when the things I need to do can't be met either.
My upgrade has been either on the 3 year mark or when specs double.
Pentium 120Mhz, 32MB RAM, 1.5GB HD, CDROM 1996
Pentium Pro 200, 32, 3 GB HD, CDROM 1999
Upgraded RAM and HD on the Pro a few times, and added a CDRW.
Both systems still run as my main PC (the pro) and a file server (the Pentium).
Celeron 400, 64MB RAM, 6GB HD, CDROM 2000
Got this laptop because I couldn't run any video players and I wanted a laptop for my masters.
iBook 800 G4, 128MB, 30GB, Combo Drive 2003
I already upgraded the RAM to the max and got a whole bunch of accessories. I did this upgrade because I wanted to switch, and my celeron didn't cut it anymore.
The iBook is already outdated, I can't play UT2004, or use GarageBand. However, it will hang around as I can still do the things I need it to do, iMovie, sound editing, Photoshop, Office, some games, etc.
Come 2006 I will definitly be upgrading. I might upgrade sooner if an iBook has double the specs, 1.6GH, 1GB RAM, SuperDrive etc. before the 3 years are up. That is my criteria for now since I don't want to get a tower. But if I get a good deal on a G5, I might go that route and keep the iBook for on-the-road stuff for as long as it lives.