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What operating system am I going to use?

Before you buy components, be sure that they are supported by the operating system you plan to use. Almost all commonly available PC devices have drivers (small programs that allow the operating system to recognize and work with a hardware device) available for current versions of Windows (generally, anything 2000, XP, Vista, or newer); if you want to run an alternative operating system, you'll have to do some research; many alternatives have extensive 'Hardware Compatibility Lists' (HCL's) as well as software compatibility.

Main Operating systems available

Windows hardware support lists

Windows XP supports most processors and motherboards based on the i386 (x86; 32-bit) or x86_64 (AMD64/EM64T; 64-bit) architectures. Put simply, all available consumer processors (especially from AMD or Intel) will work with the Windows XP operating system.
For other hardware, see Microsoft's compatibility list.

Linux hardware support lists

As one of the most popular Open-Source (free) operating systems, Linux is a very good alternative. It has versions for many different architectures, including i386, x64 and PowerPC, though i386 versions are much more common. It will also support all kinds of processors, enabling it to be used on Palm PCs and even iPods. There are many different versions of Linux, produced by different companies. These are called 'distributions' or 'distros' for short. For a desktop PC, you should make sure to pick a desktop distro, one where the company/organisation has desktop users in mind, e.g. Ubuntu, SimplyMEPIS or Mandriva. It should be noted, however, that many popular programs, especially games, are not available for Linux, and the only way to run them is with special compatibility layers or programs like Wine, which may or may not work with a specific program.
All this is important to bear in mind as different distros will support different hardware (generally more 'bleeding-edge' distros will support newer hardware – look at Fedora, SuSE, Ubuntu, but not the stable release of Debian). A good rule of thumb is to buy hardware that is 12 to 18 months old, as it most likely has Linux support with most distros, but won't be too old. Besides, the PC will be cheaper.

BSDs hardware support lists

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What will be the main function of the computer?

If you're going to build a computer from scratch for a specific purpose, you'll want to keep that purpose in mind when choosing your components; don't just go to the store or an online shop and start buying. Consider what you want to use the computer for, you may be able to save money by specifying expensive, premium parts only where needed.
Any reasonably configured computer built from current components will offer adequate Internet browsing and word-processing capabilities. For an office computer, this is often all that is needed. As long as you provide enough RAM for your chosen operating system (256 MB to 1 GB for XP or Linux, 2 GB for Vista) any processor you can buy new will provide acceptable performance. If the computer is for gaming, a fast processor, the addition of a high-end graphics accelerator card (or two) and extra RAM will provide a more satisfactory gaming experience. Besides gaming, computers intended for video editing, serious audio work, CAD/CAM, or animation will benefit from beefier components.
Here are some general system categories. Your own needs will probably not fit neatly into one of these, but they are a good way to start thinking about what you are going to use your computer for. With each we’ve indicated the components you should emphasize when building the system.

Simple web surfer

To provide basic functionality to a user who just needs web surfing, a little word processing, and the occasional game of solitaire, it’s important not to go overboard. Such a user has no need for a top of the line processor or 3D graphics card. A modestly configured system with an adequate internet connection will suit this user best and can be assembled quite cheaply.
This usage pattern is not going to stress any particular component, you should be looking at a mid- to low-level processor (historically, and currently, at about the $125 price point or less), enough RAM for the OS and a mother board with built in Ethernet, video and audio. You can use a mid-level case/power supply combo (these components are often sold as a pair).
If you have a little extra money, spend it on a better monitor, mouse/keyboard, and case/power supply in that order.

Office computer

An office computer can be expected to do word processing, spreadsheet and database work, internet and intranet access (including e-mail) and a little light development of spreadsheets, databases, and presentations. It might also be called on to do page layout work, some 2D graphic creation, and/or terminal emulation.
None of this stresses any particular component either, but since office workers often run several applications at the same time, and because time is money in this space, a strong mid-level processor is suggested. Typically this would be the processor three or four places from the top of the line. Plenty of RAM will also facilitate multitasking and save time.
You will not need much in the way of 3D graphics but you’ll want to make sure that the video subsystem has it’s own memory rather than using system RAM. Many integrated video systems do this and it can really slow things down. A cheap (sub $75) (for this and other prices in US dollars see www.xe.com/ucc or other currency converter of your choice for conversion into your local currency) video card with 64 meg or more can be a good investment.
You’ll want a sturdy case (computers kept under desks get kicked by users and poked by cleaning staff) with a reliable power supply but nothing fancy. If you plan on keeping the system running nearly all the time, look for a power supply with a good reliability record. Any extra budget after the above should focus on a better monitor, better/more ergonomic mouse/keyboard and more RAM.

Server

A server these days can be anything from a home unit serving MP3's and homework files to the kids, to a machine running a business-critical system for a small business, to a 3u rack mount unit serving up millions of hits a day on the internet.
The thing that most servers have in common is that they are always on and therefore reliability is a key characteristic. Also they serve more than one user while storing and processing important information. For this reason servers are often equipped with redundant systems such as dual power supplies, RAID 5 arrays of four or more hard disks, special server grade processors that require error-correcting memory, multiple high-speed Ethernet connections, etc.
All of this is a little beyond the scope of the current work, but, in general, servers need lots of RAM, fast redundant hard drives, and the most reliable components your budget will allow. The CPU choice should be made in accordance with the use of the server. A simple print/fax server will do fine with a CPU stolen from a museum, whereas a server running a database and a front end for that, will work much better with a dual or quad-core, top of the line CPU. A note for the multi-core CPUs: make sure that your OS supports them.
On the other end of the hardware list, since nobody is usually sitting at them, you can get away with the cheapest possible keyboard, mouse and monitor (in fact many servers run "headless" with no monitor at all). Graphics are also a very low priority on these machines, and a read only CD/DVD-ROM optical drive (used, infrequently, for installing software and updates) will do just fine.

Gaming system

We’re not talking here about the occasional game of solitaire or a secret late night Zuma obsession. We’re talking about cutting edge 3D gaming – first-person shooters or real-time strategy games with thousands of troops on the screen at the same time, with anisotropic filtering and anti-aliasing and mip-mapped specular reflections and a lot of other confusing terminology that describes visual effects designed to make your system fall down on its knees and cry like a little girl.
A top of the range processor is not critical to gaming performance, but you will need at least a mid range one and plenty of RAM, as well as a motherboard to match, since the speed of the motherboard buses can limit high-end components. The most important part will be the video card (or cards) with cutting edge GPU's (Graphic Processing Units). ATI and NVIDIA have been competing for "king of the graphics card" honours for years and the competition is so keen that new cards running on new GPU's are released, it seems, twice a month. So do your research and buy the best current cards you can afford.
The other component which can offload some of the burden from your CPU is a good audio card. The DSP's (Digital Signal Processors) on the audio card can take over a lot of the sound processing and free up the CPU for other tasks. Currently Creative Labs pretty much owns this space, but again do your research (partly by reading on) and get the best audio card you can afford.
Finally all of these components are going to require a pretty hefty power supply, particularly if you decide to run two graphics cards in Crossfire (ATI) or SLI (NVIDIA) mode, in which case make sure the power supply is rated for the dual-graphics card mode you choose. Generally a serious gaming rig will require at least a 500 watt supply; units are available up to 1000 watts (1 Kilowatt) and two Kilowatt supplies have been announced. Keep in mind that having a higher-rated power supply will not actually increase the power your computer draws. The rating is the maximum that the power supply is designed to provide. Get the best you can afford.
As you may have noticed, pretty much every component inside the computer needs to be top of the line; the same is true outside the case. You’ll want a big monitor, and a high resolution mouse. There are even gaming keyboards with the keys specially arranged, not to mention joysticks, throttle controllers, driving wheels, etc.
So, given that your budget is not bottomless, how do you prioritize? Well, the processor and video card are the components that will have the most effect on your gaming performance. Next comes the motherboard and RAM. If you use one instead of two video cards, you can also use a less expensive power supply. One of the advantages to building your own computer is that you can get the components you can afford now and plan to upgrade them later.
A note on cases for gaming rigs – it is not necessary to get a case with a side window that reveals glowing blue fans and revolving animated heatsinks. A well-built plain case will do just as well and let you spend more money on the components that matter. But if you have the cash, and that’s your taste, there is lots of bling available these days, so go crazy.

Entertainment system/media center

This is a computer designed to sit in the living room with the rest of your A/V gear. The idea is that it will record and serve audio and video files for replay via your existing television and stereo. The current notion is that this computer should be built in a special case that makes it look more like a stereo component, the size of which can present a challenge when it comes to getting all the necessary parts fitted.
For this system a mid-range processor will be fine, along with a generous amount of RAM. A fast Ethernet connection will facilitate sharing large files. You’ll also want a TV tuner card (or two) to get video in and out of the machine. Many of these also provide DVR (digital video recorder) functionality, often without the monthly subscription fees and DRM (digital rights management) restrictions required by companies like Tivo. A wireless keyboard and mouse provide for couch-based use and a separate monitor may be unnecessary as your TV will fill that role.
All components should be as quiet as possible since you'll likely be watching/listening in the same room. For this application it makes sense to trade a little power for passively-cooled (without fans) parts. Following this logic, one may consider fanless VIA CPUs and mainboards, the third alternative in the CPU biz usually dominated by Intel and AMD.

Workstation

A workstation was, originally, a single-user computer with more muscle than a PC, intended to support a demanding technical application, like CAD or complicated array-based simulations of real world phenomena. The niche that these computers filled – between high end PC’s and low end minicomputers – has essentially evaporated. The serious scientific applications have migrated to clusters of PC's with near super-computer speeds, and end-user applications, like video editing, music production and CAD, run well on high-end PC's. One sector that still uses large workstation farms from Sun or Silicon Graphics is serious, Pixar-style animation.
For any of the following uses, you will need the fastest processor and the most RAM you can manage.
Note: On an Microsoft OS (anyone before Vista 64x), the maximum practical RAM available for programs is 3 Gigabytes. the 4th gigabyte will be partially absorbed by system overhead.

Video editing

Big and fast hard drives are key. 10000 RPM Raptors in Raid 0 as working space with multiple 750 GB drives or 1 terabyte drives for storage is a good target. SATA/300 is highly recommended and SCSI subsystems should also be considered. A large amount of memory (2GB, 3GB, even 4GB) would be beneficial.

Music production

Plenty of disk space is important, you'll also want at least 2 GB of RAM, but a music production (recording and mixing) workstation is chiefly distinguished by specialized external components – studio reference monitors instead of normal speakers, mixing consoles, microphones, etc. If you want to record external sources, like vocals or instruments, you'll need an audio interface which allows you to plug mics or instruments into your computer.
Another feature to consider with regard to your interface is I/O capability, as well as "breakouts". Many of the higher end PCI based audio interfaces will support a "breakout box", that will provide a larger number of inputs for simultaneous recording of multiple tracks. There are also an increasing number of very reliable, extremely low latency {the amount of time that it takes your sound card to convert an analog signal, like a guitar string, to a digital signal and back) external interfaces. These can be connected by USB or Firewire.
One piece of advice, if you have extra money, get better microphones - even if you have to trade the Bluesmobile.

CAD/CAM

More than most, a CAD/CAM workstation tends to be a machine that runs a single application, so choose your software and build the computer to support that. You’re spending a lot of money, usually, for your key app, so get advice from the people who wrote it.

Do I plan on overclocking my computer?

Overclocking consists of running components at faster internal speeds than they are rated for. If you are serious about overclocking your computer, you need to do extensive research into the components you select, as some parts respond to overclocking better than others. Processors that respond well to heavy overclocking are generally not very expensive (though overclockable memory is), but the price of a component is by no means a guarantee of its overclocking potential. Overclocking usually voids your warranty and is risky (you can destroy your entire computer), so be warned! You need to think hard about cooling the computer as overclocking generates heat. Anything from a few extra fans to a liquid-cooled system may be necessary depending on the nature of your system.

Do I plan on underclocking my computer?

This can be ideal for always-on entertainment systems. Underclocked parts run cooler, often enabling passive cooling options to be used, which leads to a much quieter system.
The risk here is not destroying your computer, as with overclocking, but possible problems with hard-disk data integrity. It is a good idea to back up your disk data periodically on a non-volatile medium, such as DVDs or tape.

Can I use any of the parts from my old computer?

This depends on your situation; if your computer is more than four years old, chances are that most of the parts will be too old, slow or incompatible for your new machine. On the other hand, if you are upgrading from a fairly new machine, you may be able to use many of the parts. All of this assumes the old computer will no longer be used. If you, or someone else, is going to continue using your old computer, it's probably best just to leave it intact.
One important point – if you are selling your old computer it's a good idea to erase the hard drive before giving it to it's new owner. Special precautions must be taken to ensure that you are not giving away your sensitive or personal information. Don't forget that a simple 'delete' command does not actually erase the data on your hard drive. The original data will still be present and can later be recovered by someone else using special programs and/or equipment. To avoid this, programs are available that will effectively 'shred' your data, making it unrecoverable. Driver floppies or CD's that come with some hard drives may also have programs to do this, that write 0s or 1s (either way, "blankness") to the whole drive. Lower-tech approaches include running a speaker magnet around the hard drive a few times or drilling a few holes in the drive. Obviously, the latter prevents it from being used again.
Since monitor technology moves quite slowly, you can probably keep your current monitor and use it on the new computer if it's of sufficient size and clarity for your work. The same can go for keyboards, as well as mice, printers, scanners, and possibly speaker sets. On the inside, you may be able to take out the floppy drive, CD-ROM drive, and possibly the sound card and hard drive (depending on how good they are, of course). Sometimes so much is used from the old computer, that the line between an upgrade and a new computer can become blurred.
Reusing a hard drive is an easy way to keep data from your old computer. With most Windows operating systems moving a boot drive from one motherboard to another will entail a series of reboots and installation of new drivers. In the case of newer Windows systems, like 2000 and XP, an entire 'refresh install' may be necessary to allow Windows to install a new Hardware Abstraction Layer. Back up your data before trying this.

Where do I find the parts?

Once you have decided what you’re going to use your computer for, and have reviewed which parts are available for reuse, you should make a list of what components you will need to buy. A few hours of research can save you years of regret, so make sure that the computer you build will do what you need it to do.
Computer terminology can be confusing, so if there are terms you don’t understand, be sure to look them up. Wikipedia is an excellent place to start if, for example, you’re not clear on the difference between, say, DDR and DDR2 memory.
There are several places to buy parts:

Also, your local town dump may have a special section for computers and monitors that others have got rid of. These can be more or less brand new computers with trivial problems such as a busted power supply or faulty cables. Of course if the dump does have such a section, you should ask permission of those in charge. They're usually glad to let you go through it, but don't leave a mess. Taking advantage of this can yield incredible finds, with a price tag of nothing or very little.

OEM vs retail

Many hardware manufacturers will sell the same components in both OEM and Retail versions. Retail hardware is intended to be sold to the end-user through retail channels, and will come fully packaged with manuals, accessories, software, etc. OEM stands for "original equipment manufacturer"; items labeled as such are intended to be sold in bulk for use by firms which integrate the components into their own products.
However, many online stores will offer OEM hardware at cheaper prices than the corresponding retail versions. You will usually receive such an item by itself in an anti-static bag. It may or may not come with a manual or a CD containing drivers. Warranties on OEM parts may often be shorter, and sometimes require you to obtain support through your vendor, rather than the manufacturer. OEM components are also sometimes specified differently than their retail counterparts, parts may be clocked slower, and ports or features may be missing. Again, do your research.

What should affect the choice of any part/peripheral?

Many things should be taken into account when deciding what parts to buy. Below are some things to consider.

Compatibility

You’ll want to make sure that all the parts you buy work together without problems. The CPU, the motherboard, and the RAM in particular must be compatible with each other. Check the motherboard manufacturer's web site; most will list compatible RAM and processors. Often quality RAM that is not on the approved list (but is of the proper type) will work anyway, but the manufacturers list of processors should be rigidly adhered to.
Again, you’ll also want to make sure that your operating system supports the hardware you choose. Windows is supported by almost everything, though watch out for older components if you're planning on using Vista. If you have any interest in running Linux or another operating system now or in the future, buy parts that are supported by that OS. It is also worth checking around the Internet to make sure there is no history of your chosen components clashing (e.g. certain combinations of hardware causing instability, crashing, etc.)

Ergonomics

Ergonomics is the science of designing things so that they work with the human body. This is obviously important when choosing peripherals such as a keyboard or mouse but should also be considered when selecting a monitor, and especially when setting up the computer for your use. If your wrist hurts or you’re getting a crick in your neck, look at the physical setup of your computer, check your chair height and posture. An ounce of prevention here can avert troublesome repetitive strain injuries.

Operating temperature

Modern components, notably processors, GPU's, RAM, and some elements on the motherboard, are very small and draw a lot of power. A small area doing a lot of work with a lot of power leads to high temperatures. Various factors can cause electronic parts to break down over time and all of these factors are exacerbated by heat. Very high temperatures can burn out chips almost instantly, while running hot can shorten the useful life of a part, so the cooler we can make these parts, the better.
If you are not going to overclock your system, stock air cooling, when paired with a good case with adequate fans, should be enough to keep your system cool. If you want a quiet computer then components designed for passive (fanless) cooling can be paired with very low noise case fans (or a well-vented case). In general, high-end parts will require more attention to cooling.
To keep your system at a proper operating temperature, you can monitor vital components with software (which usually comes with your motherboard). If you are seeing high temps, make sure the interior of your case is dust free, and remember that most cooling solutions can not reduce the temperature of your computer parts below room temperature. Of course, unless you happen to have your computer outdoors in a climate such as the Sahara, room temperature will be well within the thermal limits of any component on your computer.
Which brings us to overclocking. It's specialty cooling solutions that make overclocking possible, a processor that might run stable at a maximum of 3.3 GHz at 60C could hit speeds as high as 5 GHz with specialized cooling systems. A sensible person wanting a 20% overclock could add a special fan/heatsink to his CPU and some extra case fans. An enthusiast seeking a major overclock might go with a water-cooling solution for the CPU and GPU and sometimes other chips. The real fanatics have been known to use liquid nitrogen or total immersion in pure water or oil. You should not try any of the more extreme solutions unless you really know what you're doing.

Price

Today, there are a wide array of hardware components and peripherals tailored to fit every home computing need and budget. With all these options to choose from, it can be a bit overwhelming if you've never bought computer parts before. Shop around and remember to factor in shipping and handling, and taxes. Some places may be priced a bit higher, but offer perks such as free shipping, limited warranties, or 24-hour tech support. Many websites, such as CNET and ZDNet offer comprehensive reviews, user ratings, and links to stores, including price comparisons.
Since prices for any given part are always falling, it’s tempting to just wait until the part you want goes down in price. Unfortunately the reason prices decline is that better/faster parts are coming out all the time, so the part you want this year that costs $500 may well be $200 next year, but by that time you won’t want it any more, you’ll want the new, better part that still costs $500. At some point you’ve got to get on the bus and ride, even if the prices are still falling.
Usually the best bet is to buy just behind the bleeding edge, where, typically, you can get 90% of the performance of the top of the line part for 50% or 60% of the price. That last 10% is very expensive and if you don’t need it, you can save a lot of money with the second-tier part.
It's a good idea to think about future upgradeability when selecting some components. While the computer that you're building today may be fine for your current needs you may want to upgrade it later. So look for components that support the newest standards and have room for future expansion, like a motherboard that will allow you to fit more memory than you are planning to use, or a case that has room for extra hard drives. If your current machine is maxed out the only possible upgrade is often a new machine.
You may also find that by overspecifing in some areas you can save money on others, e.g. if you don't currently need fantastic sound but you do need IEEE1394 (Firewire, iLink) then you might want to purchase a sound card anyway as some of the higher end sound cards also have a IEEE1394 port.

Power

If money is no object, this is an easy question; just buy the most powerful components you can find. If, like most of us, there are limits to what you can/want to spend, then focus on those areas where more powerful parts will pay off for you and scrimp on others. Always look for that sweet spot on the price/performance curve where you get the most bang for your buck.

Primary components

These are the components that will be the core of your new computer. It is impractical to put together a PC compatible computer without these components and a bare set of peripherals.

Chassis (case) & power supply

In earlier eras most cases were beige, and since most components drew far less power than similar components do now, power supplies received little attention. Recently, however, cases for the home market have become considerably more elaborate, with lights, side windows, glow-in-the-dark cables and other shiny/glowing embellishments. Cases now come in a plethora of styles and colors to suit anyone's taste. And as current components require much more power, power supply quality and size is an important issue.
If you are only building an office computer, the style of case will be of little concern to you. You might want an inexpensive ATX case (ATX is a specification which refers to the size of the motherboard. Any ATX motherboard, and the parts designed therefore, will fit in any ATX case), and an inexpensive power supply as you won't be running a high-end processor or graphics card. As a guide, you’ll want a power supply with a rating of more than 300 watts; any less won’t reliably power modern components. Most case/PSU bundles are adequate, but tend to feature a lower quality power supply than those that are sold separately from cases. If possible, avoid power supplies with sleeve bearing fans, as these are of considerably lesser quality.
Before purchasing any PSU, make sure that the supplied wattage is sufficient for your components. Power requirements are usually listed in the manuals that came with your components. It is important to note a power supply's total power, and the power at each voltage: 3.3, 5 and 12V. If any of these do not meet your requirements, the rest of the specifications don't matter.
Some companies have calculators to help you determine what your power supply needs are; if you are the type to just plug in the numbers without reading the details, you should buy a power supply that is 1.5 to 2 times the wattage that results from these calculators.
For a quiet system, you can choose a fanless power supply -- more expensive but well worth it if noise is a concern, but be sure to monitor system temperatures to make sure cooling is adequate.
For cases and power supply here are some things to consider:

Form factor

Form factor is the specification that provides the physical measurements for the size of components and where mounting devices for them are located.

Many OEM computers use non-standard form factors. Be sure to choose a motherboard compatible with your case's form factor.

Number of storage drive spaces

Internal hard drives/floppy drives (which go in the small 3.5" bays) and internal CD/DVD drives (which go in the large 5.25" bays) take up space in the case, so make sure you consider how many drives you will need and what size slot they require. Note that optical drives and floppy drives will need what are called "external" slots (meaning they have a hole in the case through which their face can be accessed, while hard drives do not need to be manipulated manually often, so they can usually go into an "internal" slot. This is not to be confused with an external drive, which doesn't go into the case at all.
Note that it's possible to buy adapters to fit items that go in small bays (usually hard drives) into large bays. It is, however, not possible to do the reverse.

Power rating

The power supply you choose needs to supply enough DC current to run your components. Beyond that it needs to supply stable, accurate voltages, i.e. the 12 volt rail needs to supply 12 volts (within normal tolerances of 10% or so) steadily under any foreseeable load, likewise the 3 and 5v rails at their respective voltages. Cheap power supplies tend to fall down in these areas. There are several tech-heavy websites that actually throw a multimeter on the PSU in the course of a review, seek these out and make sure you select a quality PSU.
In selecting a power supply, check carefully that it has the power feeds you need, e.g. six-pin PCI power, 20 vs. 24-pin motherboard connectors, etc. If you are planning on running two video cards in SLI (NVIDIA) or Crossfire (ATI) mode, make sure your power supply is approved for that. Both companies have certification programs.
There are several calculators that try to help you select an adequate PSU for your system, such as:

Choose an efficient PSU. Efficient PSU's run cooler and more quietly and thus do not create as much noise (important if you plan to sleep (or think) in the same room with it or use it as a media center PC).
More informations about this theme can be found in Silent PC Review, OCAU Wiki, among others.

Fans

Most cases mount one or more case fans, distinct from the fans that may be attached to the power supply, video card and CPU. The purpose of a case mounted fan is to move air through the system and carry excess heat out. This is why some cases may have two or more fans mounted in a push-pull configuration (one fan pulls cool outside air in, the other pushes hot interior air out). The more air these fans can move, the cooler things will generally be.
Fans currently come in two basic sizes, 80mm and 120mm. Cases tend to support either one or the other; in that the case fan mounts can hold that size. The larger 120mm fans spin more slowly while moving a given volume of air, and slower fans are usually quieter fans, so the 120's are generally preferred even though they cost a little more. Good 80mm fans can still be pretty quiet though, so while fan size is a factor, it shouldn’t be a deal-breaker if the case has other features you like.
Make sure the power plug on any case fans is supported by your mother board, 3 and 4-pin Molex connectors are common. Fans can also be powered directly by the PSU, but in that configuration, the motherboard can’t control or report the fan’s speed.

CPU (processor)

The Central Processing Unit (CPU) is the heart of your computer. It performs nearly all the actual computation that takes place as the computer is used. The choice of a CPU will affect the ultimate speed of the computer more than any other single component.
Before we can explain the differences between CPUs, you must first be familiar with certain CPU properties.
Clock speed 
Clock speed, measured in gigahertz (GHz) or megahertz (MHz) (1 GHz = 1000 MHz), is the number of calculation cycles that your CPU can perform per second. Therefore, a higher clock speed generally indicates a faster processor. But not all CPUs perform an equal quantity of work per cycle, meaning two CPUs at the same clock speed can potentially perform at very different levels.
IPC 
IPC, or instructions per cycle, is the amount of work a CPU can do in a cycle. With modern processors this number is an average.
Front side bus speed (FSB) 
Front side bus speed is the rate at which the CPU communicates with the northbridge chipset component on your motherboard,and, through the northbridge with main memory, measured in MHz. A larger FSB value shows that your CPU is able to communicate with memory and other components on the motherboard at a higher speed.
Interface (Socket/Slot) 
CPU’s plug into a socket on the motherboard. It is very important that your CPU is a COMPLETE MATCH to your motherboard CPU socket. Plugging a CPU into the wrong socket will never work and will usually break either the CPU, the socket, or both.
Bit width 
Modern processors are either 32-bit or 64-bit (this is a simplification; see http://en.wikipedia.org/wiki/64-bit for details). For our purposes a processor can be called 64-bit if it will support running a 64-bit operating system. The newer chips from Intel and AMD all support this for most 64-bit OS’s. If you have any doubts, check the support materials for the 64-bit OS you are interested in running.
Hyper-threading (HT) 
Hyper-threading is an Intel technology which allows a single core processor to simulate having two cores, giving a performance boost when running several programs at once. It requires motherboards and chipsets supporting Hyper-Threading technology. The advantages of the Hyper-Threading technology have never been breathtaking and Intel has gone back and forth on its support in multi-core processors.
Cache 
Cache is memory implemented directly on the CPU. Data which is being used in computations is stored in the cache as much as possible and can be retrieved from there much faster than the same data can be pulled through the northbridge from main memory. Generally, the larger the cache, the faster the system will run. Cache comes in (usually) three varieties, L1, L2, and L3. L1 being the smallest and fastest, and L3 being the largest and slowest. Usually only the L2 cache size will be shown, as L3 is rarely used in processor design, and L1 will often stay the same size throughout an entire processor product line.
Core 
The core is the heart of the CPU. Often several cores will be marketed under the same name, so look at what core you are buying. It’s a mistake to choose a processor based solely on it’s rated speed in hertz . This number, while easy to understand, does not tell the whole story. The number of cores and the way they communicate will have a big effect, as will the fundamental architecture of the core or cores themselves.
Slower processors are generally preferred for overclocking, as they can often achieve higher overclocking percentages. Retail CPU's come in a package containing a HSF (Heat Sink Fan), instructions, and a warranty, often 3 years. OEM CPUs do not include these.
The current CPU speeds and advantages change frequently, so for up-to-date comparisons, you may want to check a website that specializes in Hardware reviews, such as Tom's Hardware Guide or Anandtech. A current (as of 14 February 2006) beginner's explanation can be found at Behardware.

Multiple cores

Advantages
Dual-core processors are a fairly new innovation built by both major processor manufacturers (Intel Core Duo / Core 2 Duo and AMD Athlon 64 X2).

Disadvantages

Multi-core Future? 
Quad core technology is finally here, and more and more programs are being built to take advantage of multiple cores. The large chip makers are discussing CPU's with eight, sixteen, even thirty two cores in the coming years. Only time and experience will tell how the advantages we are seeing with duo and quad core configurations will scale.

Descriptions

Often in advertisements (especially for prebuilt systems) a processor will be described briefly, like this:
Pentium 4 at 3.2 GHz
But there’s more to it than that, a more detailed specification would read as follows:
Intel Pentium 4 3.2GHz LGA775 FSB800 HT L2-2MB
Which parses out to:
Model: Intel Pentium 4
Clock Speed: 3.2GHz (=3200MHz)
Interface: Land Grid Array 775
Frontside Bus: 800 Mhz
Other Spec: HyperThreading technology
L2-Cache: 2MB (=2048 kB)
So we can see that while 3.2 GHz is a screaming fast clock speed, this processor might not be as fast as, say, a processor with a 4 megabyte L2 cache, a 1066 Mhz front side bus and two cores, even if that processor runs at a slower clock speed.

Intel

Intel classifies its CPUs using a series of numbers. 3xx, 4xx, 5xx, 6xx and 7xx of which 7xx denominates the highest end products. Generally, the higher the number, the faster the CPU and the more expensive. Usually, models and ratings correspond.

The number followed by suffix J signifies XD technology.
E.g. Intel Pentium 4 3.0Ghz L2-1MB with HT --> Intel Pentium 4 530J
There is also the Core 2 Duo range out at the moment - it's naming scheme is relatively normal, except for the models ending with 50, they have 1333mhz FSB.

AMD

AMD CPUs have a different classification. The AMD Athlon CPU rating are not of the actual clock speed but rather the equivalence bench mark performance corresponding to a comparison to the AMD Athlon Thunderbird 1.0Ghz. The conversion Table is as follows:

You may wish to purchase a high end AMD64/EM64T (AMD and Intel, respectively) processor, which provides support for 64-bit operating systems (eg. Windows XP Professional 64-bit Edition). Most 64-bit processors are backwards-compatible with 32-bit operating systems and applications.. Given the huge expansion in addressable memory afforded by the transition from 32-bit to 64-bit (a 32-bit address space tops out at 4 Gigabytes while a 64-bit space encompasses 17,179,869,184 Gigabytes) 64 bit operating systems are the wave of the future. For the time being though, given the enormous quantity of 32-bit software out there, and the limited advantages of 64-bit as of yet, the move is likely to be a slow one.

CPU cooling

CPU cooling is very important, a less than average CPU temperature prolongs CPU life (up to more than 10 years). On the other hand, high CPU temperatures can cause unreliable operation, such as computer freezes, or slow operation. Extremely high temperatures can cause immediate CPU destruction by melting the materials in the chip and changing the physical shape of the sensitive transistors on the CPU. Because of this, never switch on the computer if your CPU has no cooling at all, or if the cooling device power cable is not plugged into the motherboard. Turn your computer on "just to test whether my CPU works" and you'll likely find that the CPU fries in less than 5 seconds and you'll be off to buy a new one.
Most CPU installations use forced-air cooling, but convection cooling and water cooling are also options. For traditional forced-air cooling, the heat sink and fan (HSF) included with most retail CPUs is usually sufficient to cool the CPU at stock speed. Overclockers might want to use a more powerful aftermarket fan, or even try water cooling to combat the increased heat engendered by overclocking.
Many retail HSF units have a thermal pad installed. These transfer heat from the CPU to the fan, helping to diffuse the heat created by the CPU. This pad is usable only once. If you wish to remove the fan from another CPU so that you can use it on your new one, or need to take it off for some reason, you will need to remove the pad and apply a thermal paste or another thermal pad. Note that some of the cheaper pads can melt in unexpected heat and may cause problems and potentially even damage if you are overclocking. In either case, thermal paste is usually more effective, just harder to apply. If you plan to do any high performance computing, or remove and replace the HSF often, thermal paste is suggested. If you are planning on a long term installation a thermal pad is often best. Using one or the other is essential to ensure cosistent heat conduction between the CPU and heatsink.
Electrically insulating thermal pastes made up of silicon are the cheapest and safest, but silver-based thermal pastes sometimes perform better and carbon-based ones perform better still. When applied improperly both can be conductive, causing electrical shorts upon contact with the motherboard. A thin properly-applied layer will usually prevent this problem, although some pastes can become runny when they get hot. Users should also beware that many "silver" thermal pastes do not actually contain any silver metal.
For quiet operation, start with a low-heat (low wattage) CPU. Processors made by VIA, such as the VIA C3, tend to produce low amounts of heat, though you will trade off a considerable amount of computing speed. The current generation of dual-core processors are more efficient than their predecessors, but give off more heat than the Via processors. You can also underclock your CPU, giving up some unneeded performance for some peace and quiet. Another option is to choose a large copper heat sink with an open fin pattern. However, true fanless operation is difficult to achieve in most case designs. You can position a case fan to blow across the heat sink, or mount a fan on the heat sink. With either choice, a large and slow fan will give better airflow and less noise than a small and fast fan.
Some low-noise CPU cooling fans require special mounting hardware on the motherboard. Be sure that the cooling systems you choose are compatible with your motherboard.

Motherboard

The motherboard is a very important part of your computer. The difference between a cheap and a quality motherboard is typically around $100. A good motherboard allows a modest CPU and RAM to run at maximum efficiency whereas a bad motherboard restricts high-end products to run only at modest levels.
There are six things one must consider in choosing a motherboard: CPU interface, Chipset, IDE or SATA support, Expansion slot interfaces, and other connectors. One must also make sure that the motherboard is of a form factor compatible with the case.

CPU interface

The CPU interface is the "plug" that your processor goes into. For your processor to physically fit in the motherboard, the interface must be an exact match to your processor. Intel currently has two mainstream formats, the older Socket 478 (which is gradually being phased out) and the newer Land Grid Array 775. AMD currently uses three sockets, AM2, 754 and 939. The new AM2 sockets are faster (compatible with DDR II RAM) and more efficient than the older two. Socket 754 was aimed at the value market, while Socket 939 was for performance applications.
Check with the motherboard manufacturer to ensure that the slot on the motherboard will support the CPU you want to use. It is important to know whether the motherboard's bus can support the exact CPU you plan on using.
If the motherboard, CPU, and heatsink/fan are not compatible and installed correctly, you can destroy the CPU and/or the motherboard in a matter of seconds. Most modern processors come with a stock cooling fan which will work well at stock speeds, stick with this if you have any doubts.

Chipset

Chipsets are also important as they determine the efficiency of RAM and Expansion slots

All current and popular AMD formats use DDR RAM, with the standard 400MHz PC3200 being most common. Most Intel socket 478 processors also use the older DDR RAM
The function of BIOS is highly important. Some BIOS features crash proof functions essential for updating the firmware. Other motherboards allow BIOS control of overclocking of CPU, RAM and Graphics card which are much more stable and safer for overclocking. Newer BIOS have temperature controls, and functions that shut down the computer if the temperature gets too high.

IDE (ATA) or SATA interface

Most motherboards have two parallel , 40 pin IDE interface connectors. These are used for connecting hard drives (though these PATA (parallel ATA) connections are rapidly being replaced by SATA (Serial ATA) connections for hard Drives and optical drives. Up to two devices can be connected to each IDE port in a Master/Slave configuration. A 44 wire ribbon cable is used for this connection with three connectors, one on each end and one in the middle (actually a few inches from one end). One end is plugged into the motherboard connection and the other end is plugged into the first (or only) device. If two devices are connected the second is connected to the middle connection. The device plugged into the end must be configured as a master (usually via a jumper on a set of pins on the device) while the second must be configured as a slave – OR both must be configured as “cable select�.
Two devices connected on the same IDE port will contend for access to the bus, this causes a compromise in the speed of the drives. The newer serial ATA (SATA) interface has four separate slots that allow independent access and this increases the speed at which hard drives work. The cables are also narrower, improving the flow of air inside the case.
The support for older (PATA) IDE drives is starting to disappear. The new G/Q/P 965 chipset series from Intel completely dropped support for such devices. Nevertheless, all motherboard makers are still including an additional IDE controller on their boards, and it will remain possible to buy an extra PCI IDE controller.

Expansion slot interfaces

Old motherboards may have one or more the following slots:

ATI still manufactures PCI graphics cards, but for better performance try a card supporting PCI-Express. AGP is not a good idea, becuase it is a standard that is on it's way out. You may come upon ancient motherboards with neither AGP nor PCI, but please don't waste your time trying to reuse them.
Due to the evolution of new graphics cards on the serial PCI-Express Technology, current newer motherboards have the following connections:

Older AGP 8x graphics cards are generally being discontinued in favor of PCI-Express 16x, as the speed and efficiency is about 4 times that of the AGP 8x technology. Old PCI cards are either now built into the motherboard (for sound cards, LAN cards, IEEE 1394 firewire and USB 2.0 interfaces) or becoming PCI-Express variants.

Other connectors

USB 
In addition to the USB 2.0 ports provided on the back panel, most motherboards will have connectors for additional ports, either on the front of the case or in a panel that fits where a PCI card might otherwise be connected. USB 2.0 ports (and be sure that your chosen motherboard supports the faster 2.0 standard) are used for connecting various peripherals such as printers, external hard drives etc. USB connectors are also used for connecting MP3 players, some cameras and an assortment of less serious devices like fans, nerf missile launchers and drink warmers. Given the growing popularity of USB devices, the more ports your motherboard supports the better.
Serial (COM) or parallel (printer) ports 
Traditional 9-pin serial and parallel ports are much less used than they used to be. Many motherboards have dropped the parallel port (formerly used almost exclusively for connecting printers) altogether, while serial ports, which once numbered as many as four, are now usually solitary. The principal use for serial ports was once connection to either a mouse or an external modem, both of these devices now connect via USB. Unless you are connecting some seriously old peripheral hardware, these ports will be of minimal importance
IEEE 1394 firewire 
Firewire ports are principally used for connecting DV (Digital Video) cameras and external hard drives. This technology got a foothold because it was much faster than USB 1.0 and 1.1. With the near ubiquity of USB 2.0, however, the original (and still the most common) IEE1394 implementation, firewire 400, was actually a little slower. For this reason, and in spite of the existence of a faster but seldom implemented specification, firewire 800, firewire is not as popular as USB. Like USB, most motherboards that support firewire will have one or more external ports on the back panel and the ability to connect one or more additional ports. One or two firewire ports will suffice for most users.
Note that, regardless of the motherboard’s native support, additional ports of all kinds can always be added via a PCI or PCI-E 1 card .

RAM (random access memory)

The amount of RAM you use has become a fairly simple choice. Unless you are building on a very restricted budget, you just have to choose between installing one, two, four, or eight gigs. One gig of RAM is plenty for most modern operating systems but all of them will run a little faster with two or four although many 32 bit operating systems have trouble addressing more than three, Windows XP in particular. It really comes down to a financial decision. You might also choose to get one gig of high quality RAM over two gig of lesser quality, especially if you plan to overclock. Some specialized applications may profit from more than two gig of RAM, if you are planning on using such, make sure you check that both your operating system and your motherboard will accommodate the amount of RAM you have in mind.
Another thing to consider when choosing the amount of RAM for your system is your graphics card. Most motherboard-integrated graphics chips and PCI Express graphics cards marketed with the "Turbo Cache" feature will use system memory to store information related to rendering graphics; this system memory is generally not available at all to the operating system. On average, these graphics processors will use between 64MB and 512MB of system memory for rendering purposes.
The actual type of RAM you will need depends on the motherboard and chipset you get. Some old motherboards use DDR (Double Data Rate) RAM but the industry is now DDR2 RAM with DDR3 coming on strong on the high end. Chipsets that use dual-channel memory require you to use two identical (in terms of size and speed) sticks of RAM. Your RAM should usually operate at the same clock speed as the CPU's Front Side Bus (FSB). Your motherboard may not be able to run RAM slower than the FSB, and using RAM faster than the FSB will simply have it run at the same speed as your FSB. Buying low-latency RAM will help with overclocking your FSB, which can be of use to people who want to get more speed from their system.
If you are upgrading from an existing computer, it's best to check if your machine requires specific kinds of RAM. Many computer OEMs, such as Gateway and HP, require custom RAM, and generic RAM available from most computer stores may cause compatibility problems in such systems.

Labeling of RAM

RAM is labeled by its Memory Size (In MB) and clock speed (or bandwidth).
SDRAM (Synchronous Dynamic RAM) is labeled by its clock speed in megahertz (MHz). For example, PC133 RAM runs at 133MHz. SDRAM is nearly obsolete as nearly all motherboards have withdrawn support for SDRAM. It is now superseded by the more efficient DDR RAM.

DDR RAM can be labeled in two different ways. It can be labeled by approximate bandwidth; as an example, 400MHz-effective DDR RAM has approximately 3.2GB/s of bandwidth, so it is commonly labeled as PC3200. It can also be labeled by its effective clock speed; 400MHz effective DDR RAM is also known as DDR-400. There is also DDR and DDR2 labeled as PC and PC2.

DDR RAM has three versions: DDR (also DDRI), DDR2 (or DDRII) and DDR3

Hard drive

Things to consider when shopping for a hard drive:
Interface
The interface of a drive is how the hard drive comunicates with the rest of the computer. The following hard drive interfaces are avalible:

Cache 
The cache of a Hard drive is a faster media than the hard drive itself, which is normally 2MB (in low-end), 8MB (standard), or 16MB (large disks only) large. The existence of a cache increases the speeds of retrieving short bursts of information, and also allows prefetching of data. Most modern hard drives have 8MB cache, which gives better performance when compared to 2MB.
Formfactor

Capacity 
The smallest desktop drives that are widely available hold about 160 gig of data, although the largest drives available on the market can contain 1TB (1000GB). Few people will need disks this large - for most people, somewhere in the range of 160-300GB will be sufficient. The amount of space you will need can depend on many factors, such as how many high-end games and programs you want to install, how many media files you wish to store, or how many high-quality videos you want to render. It is usually better to get a hard drive with a capacity larger than you anticipate using, in case you need more in the future. If you run out of space, you can always add an additional hard drive using any free IDE or Serial ATA connector, or through an external interface, such as USB or FireWire.
Rotational Speed 
The speed at which the hard drives platters spin. Most laptop (2.5 inch) drives spin at 5400 RPM, while common desktop drives come in at 7200. There are PATA and SATA drives that spin at 10,000 RPM and some SCSI drives hit 15,000. However drives above 7,200 RPM usually have limited capacity, and a much higher price than comparable 7,200RPM drives, making such drives advisable only when the fastest possible speeds are required.
Noise and Heat 
Modern hard drives are fairly quiet in operation though some people are sensitive to the faint hum and occasional buzz they do make. If your HD is loud, it’s time to think about replacing it. Hard drives will also throw some heat and adequate air circulation should be provided, usually by case fans. There is software available that will allow you to monitor both the health and temperature of your hard drive(s), it’s a good idea to check from time to time.
Warranty 
Many manufactures offer warranties ranging from 30 days (typically OEM) up to five years. It is well worth spending an extra few dollars to get the drive that carries a longer warranty.

Secondary components

These components are important to your computer, but are not as central and necessary as the Core Components.

Video output

For a computer to use a display for monitoring it will need some form of video card into which a display can be plugged. The majority of home and office computers, which predominatly use 2D graphics for office applications and web surfing can use an 'onboard' or integrated graphic processor which will be included on most low to mid range motherboards. For gaming, or 3D modelling, a good quality graphics card will be needed.
Currently, two companies dominate the 3D graphics accelerator market; nVIDIA and ATI. nVIDIA and ATI build their own graphics products, and license their technologies to other companies. Both companies make a complete line of cards with entries at every price/performance level, and each brand has its own supporters. Video cards have their own RAM, and many of the same rules that dominate the motherboard RAM field apply here: to a point, the more RAM, and the faster it is, the better the performance will be. Most applications require at least 32MB of video RAM, although 256MB is rapidly becoming the new standard. On the other end, 512MB video cards top the consumer end of the video card market. As a rule of thumb, if you want a high end video card, you need a minimum of 128MB of video memory -- preferably 256MB. Don't be fooled, though; memory is only part of the card and the actual video processor is more important than the memory.
It is generally better to choose your video card based on your own research, as everyone has slightly different needs. Many video card and chip makers are known to measure their products' performances in ways that you may not find practical. A good video card is often much more than a robust 3D renderer; be sure to examine what you want and need your card to do, such as digital (DVI) output, TV output, multiple-monitor support, built-in TV tuners and video input. Another reason you need to carefully research is that manufacturers will often use confusing model numbers designed to make a card sound better than it is to sell it better. For example, the Geforce 4 MX series of cards claim to be a "Geforce 4," however, the actual processor is closer to a Geforce 2, only more powerful, meaning that these cards actually lack many features available even to the Geforce 3 series. However, when these cards were first produced, they were considerably cheaper than a real Geforce 4 (the TI series) making them an ideal choice if you were more interested in working on a spreadsheet than in playing games. For this sort of reason, you have to carefully pick your card depending on your needs. TV outputs can easily be adapted to your computer by using a DVI - Component Video cable.
Newer technologies such as SLI and Crossfire allow the use of two video cards to render the same video scene, similar to using two CPUs or a dual-core CPU. These systems tend to be expensive, as only some video cards offer this option, and you'll need two of them. However, it can be a useful upgrade path to consider. A SLI-capable motherboard is usually not much more expensive than the regular model, and will work fine with a single video card. You can use it with one card now, and buy another one in the future (which will probably be much cheaper by then), which means you will take advantage of your old video card too.

Interface

There are four different current graphics card interfaces: integrated, PCI, AGP and PCI-Express.
Most retail computers will ship with an integrated graphics card. It is important to understand that an integrated graphics card uses the system's RAM, and relies heavily on your system's CPU. This will mean slow performance for graphic-intensive software, such as games. Most motherboards that have integrated graphics will also have one of the other three slot interfaces available so it isn't hard to place a new card to suit your needs if the need ever arises.
Older video cards use the standard PCI slots that are now growing obsolete due to limited speed and memory. These cards are needed for a few rare systems lacking an AGP or PCI-E slot (usually low end desktop systems designed to be cheap.) They are also useful for adding additional video cards to a system.
Although the AGP standard has now, by and large, been superseded by PCI-E, the cards are still available as are a few motherboards that support them. There are 4 different speed and bandwidths of AGP, 1x, 2x, 4x and 8x. While 8x is the fastest and most common for high end products, the true performance of your AGP card is limited by the lower AGP value of your graphics card and motherboard. For example, an AGP 8x card on a 4x motherboard can only run at up to 4x. AGP has mostly been phased out and there will not be an AGP 16x due to technical limitations.
The newest trend in graphics card is the PCI-Express (not to be confused with PCI-X) system that supports up to 16x speeds. Some graphics cards still come in both AGP and PCI-E 16x models but the newest models of graphics cards are often PCI-E 16x only. While most motherboards have only one PCI-E 16x slot, those with two such slots can combine the power of two video cards using technologies known as SLI for NVidia, and CrossFire for ATI. However, you will have to match the video cards to a motherboard supporting the multiple card technology of choice, and use two similar video cards that both support dual video cards.
Keep in mind that to provide best picture quality your graphics card must be capable of displaying the same resolution as your LCD display's native resolution.

CD/DVD

Optical drives have progressed a long way in the past few years, and you can now easily purchase DVD writers that are capable of burning 9GB of data to a disk for an insignificant amount of money. Even if you don't plan on watching or copying DVDs on your computer, it is still worth purchasing a burner for their superior backup capabilities.
When purchasing a DVD writer, you will want one that is capable of burning both the '+' and '-' standards, and it should also be Dual Layer compatible. This will ensure that you can burn to almost all recordable DVDs currently on the market (the other major format, DVD-RAM is almost unused, for the most part, so don't worry about it).

Floppy drive

Though Floppy drives have been made largely obsolete in recent years by devices such as USB "Thumb Drives" and CD writers, they are often installed anyway because they are sometimes required for BIOS updates and exchanging small files with older computers. Floppy drives block air movement with wide cables, and can make computers set to check the drive take longer to start (most have an option in their bios to disable this.). One option to overcome the cable problem and to make it easier to install is to buy an external USB floppy drive, these are potentially a little bit faster and can be plugged into a different system (such as a laptop without a floppy drive.) However, not all systems support booting from a USB floppy drive -- most notably older motherboards.
It should be noted that floppy disks are not suitable for long term storage of data, even in a backup role. Never keep your only copy of an important file on a floppy disk.

Sound card

Most motherboards have built-in sound features. These are often adequate for most users. However, you can purchase a good sound card and speakers at relatively low cost - a few dollars at the low end can make an enormous difference in the range and clarity of sound. Also, these onboard systems tend to use more system resources, so you are better off with a real soundcard for gaming.
Sound card quality depends on a few factors. The digital-analog conversion (DAC) is generally the most important stage for general clarity, but this is hard to measure. Reviews, especially those from audiophile sources, are worth consulting for this; but don't go purely by specifications, as many different models with similar specs can produce completely different results. Cards may offer digital (S/PDIF) output, in which case the DAC process is moved from your sound card either to a dedicated receiver or to one built into your speakers.
Sound cards made for gaming or professional music tend to do outstandingly well for their particular purpose. In games various effects are oftentimes applied to the sound in real-time, and a gaming sound card will be able to do this processing on-board, instead of using your CPU for the task. Professional music cards tend to be built both for maximum sound quality and low latency (transmission delay) input and output, and include more and/or different kinds of inputs than those of consumer cards.

Modem

A modem is needed in order to connect to a dial up internet connection. A modem can also be used for faxing. Modems can attach to the computer in different ways, and can have built-in processing or use the computer's CPU for processing.
Modems with built-in processing generally include all modems that connect via a standard serial port, as well as any modems that refer to themselves as "Hardware Modems". Software Modems, or modems that rely on the CPU generally include both Internal and USB modems, or have packaging that mentions drivers or requiring a specific CPU to work.
Modems that rely on the CPU are often designed specifically for the current version of Windows only, and will require drivers that are incompatible with future Windows versions, and may be difficult to upgrade. Software Modems are also very difficult to find drivers for non-Windows operating systems. The manufacturer is unlikely to support the hardware with new drivers after it is discontinued, forcing you to buy new hardware. Most such modems are internal or external USB, but this is not always the case.
Modems can be attached via USB, a traditional serial port, or an internal card slot. Internal and USB modems are more easily autodetected by the operating system and less likely to have problems with setup. USB and serial port modems often require an extra power supply block.
Gaming modems are normal modems that default to having a low compression setting to reduce lag, but are generally no longer used by gamers, who prefer broadband connections.

Ethernet card

An ethernet card is required in order to connect to a local area network or a cable or DSL modem. These typically come in speeds of 10Mbps, 100Mbps, or 1000Mbps (gigabit); these are designated as 10Mbps, 10/100Mbps, or 10/100/1000Mbps products. The 10/100 and 10/100/1000 parts are most commonly in use today. In many cases, one or two ethernet adapters will be built into a motherboard. If there are none, you will have to purchase one - these typically are inserted into a PCI slot. To get the full speed of 10/100/1000Mbps ethernet, it's best to get a motherboard with that connector built in.

Peripherals

Anything outside the case that connects to your computer is considered a peripheral. The keyboard, mouse and monitor are pretty much the bare minimum you can go with and still be able to interact with your computer. Your choice in peripherals depends on personal preference and what you intend to do with your computer.

Mouse and keyboard

There are, broadly, two types of mouse: optical and mechanical. Mechanical mice use a rubber coated ball bearing that contacts the mousepad or other surface and actually rolls around. Optical mice use a bright light and a sensor to track the movement of the mouse.
When choosing a mouse, there is generally no reason not to choose an optical mouse. They are considerably lighter (and as such, reduce RSI) as they have no moving parts, they are much better at smoothly tracking movement, and they don’t require constant cleaning like ball mice (though it may be wise to brush off the lens with a q-tip or other soft tool on occasion). Make sure that you spend money on a decent-quality mouse made by companies such as Microsoft or Logitech, as lower-end optical mice will skip if moved too fast. Mice of medium-to-high quality will track your movement almost flawlessly.
Although three buttons are generally enough for operating a computer in normal circumstances, extra buttons can come in handy, as you can add set actions to each button, and they can come in handy for playing various video games. One thing to note is that with some mice those extra buttons are not actually seen by the computer itself as extra buttons and will not work properly in games. These buttons use software provided by the manufacturer to function. However, it is sometimes possible to configure the software to map the button to act like a certain keyboard key so that it will be possible to use it in games in this manner.
Wireless keyboards and mice do not now display the sort of noticeable delay that they once did, and now also have considerably improved battery life. However, gamers may still want to avoid wireless input devices because the very slight delay may impact gaming activities, though some of the higher end models have less trouble with this. The extra weight of the batteries can also be an inconvenience.

Printer and scanner

For most purposes, a mid-range inkjet printer will work well for most people. If you plan on printing photos, you will want one that is capable of printing at around 4800dpi. Also, you will want to compare the speed of various printers, which is usually listed in ppm (pages per minute). When choosing a printer, always check how much new cartridges cost, as replacement cartridges can quickly outweigh the actual printer's cost. Be aware of other possible quirks as well. For example, Epson has protection measures that make refilling your own ink cartridges more difficult because an embedded microchip that keeps track of how much ink has been used keeps the printer from seeing the cartridge as full once it has been emptied.
For office users that plan to do quite a bit of black and white printing buying a black and white laser printer is now an affordable option, and the savings and speed can quickly add up for home office users printing more than 500 pages a month.
Scanners are useful, especially in office settings, they can function with your printer as a photocopier, and with software can also interact with your modem to send Faxes. When purchasing a Scanner, check to see how "accessible" it is (does it have one-touch buttons), and check how good the scanning quality is, before you leave the store if possible.
Finally, "Multi-Function Centres" (also called "Printer-Scanner-Copiers") are often a cost-effective solution to purchasing both, as they take up only one port on your computer, and one power point, but remember that they can be a liability, since if one component breaks down, both may need to be replaced.

Display

When choosing a display for your computer, you have two choices: a Cathode Ray Tube (CRT) screen, or a Liquid Crystal Display (LCD) screen. Both technologies have their advantages and disadvantages: CRTs have been preferred by gamers and graphic artists, for their generally superior response times and color gamut, but this is offset by the added size and weight that a large screen requires. CRTs are still somewhat cheaper in sizes of 17 inches or less but LCDs are generally less expensive than CRTs in sizes above 17 inches. In sizes above 21 inches LCDs are far cheaper, and much easier to find. High-end LCD models are generally preferred for tasks which need higher definition, such as movie editing, and are also popular amongst people with little-to-no desk space, as they do not need as much space as a similarly-sized CRT.

LCD panels

Liquid Crystal Displays (LCDs) have the advantage of being a completely digital setup, when used with the DVI-D or HDMI digital connectors. When running at the screen's native resolution, this can result in the most stable and sharp image available on current monitors. Many LCD panel displays are sold with an analog 15-pin VGA connector or, rarely, with an analog DVI-I connector. Such displays will be a bit fuzzier than their digital counterparts, and are generally not preferred over a similarly-sized CRT. If you want an LCD display, be sure to choose a digital setup if you can; however, manufacturers have chosen to use this feature for price differentiation. The prime disadvantage of LCDs is "dead pixels", which are small failing areas on your monitor, which can be very annoying, but generally aren't covered under warranty - this can make purchasing LCD displays a financial risk. LCDs are generally okay for fast-paced gaming, but you should be sure that your screen has a fairly fast response time (of 12 ms or lower) if you want to play fast games. Nearly all flat panels sold today meet this requirement, some by a factor of 3. When picking an LCD, keep in mind that they are designed to display at one resolution only, so, to reap the benefits of your screen, your graphics card must be capable of displaying at that resolution. That in mind, they can display lower resolutions with a black frame around the outside (which means your entire screen isn't filled), or by stretching the image (which leads to much lower quality). Running at a higher resolution than your monitor can handle will either make everything on the screen smaller, at a significant quality drop, or will display only a part of the screen at a time.

CRT (cathode ray tube) displays

The other key type of display is the CRT or Cathode Ray Tube display. While CRT technology is older it often outperforms LCD technology in terms of color reproduction, although LCD displays are quickly catching up. CRTs are becoming increasingly difficult to find and have almost vanished from mass-market retail. High end CRT's are still available, though they are rapidly being discontinued, and now cost the moon. Used CRT's on the other hand, can often be had for a song as people change over to LCD screens, this won't last forever though.
There are two types of CRT displays, shadow mask and aperture grill. An aperture grill display is brighter and perfectly flat in the vertical direction, but is more fragile and has one or two mostly-unnoticeable thin black lines (support wires) running across the screen. CRTs are generally 2-4 times as deep as similarly-sized LCDs, and can weigh around 10 times as much. If you purchase a CRT display over the internet, shipping is much more expensive than an LCD, due to the significantly greater weight.
CRT's can cause headaches in some people when run at lower frequencies, so it may be ideal to pick a screen offering higher update frequencies at whichever resolutions you intend to use. Most people who have problems with low frequencies (60Hz) find it preferable to have at least 80Hz at the intended resolution. Many won't be bothered by this at all however.
Note that sometimes CRTs with a flat screen instead of a curved one are called "flat screens", this is not to be confused with the term "flat panel" used to refer to LCDs.

Speakers

Computer speaker sets come in two general varieties; 2/2.1 sets(over a wide range of quality), and "surround", "theater", or "gaming" with four or more speakers, which tend to be somewhat more expensive. Low-end speakers can suffer from low bass response or inadequate amplification, both of which compromise sound quality. Powered speakers with separate sub-woofers usually cost only a few dollars more and can sound much better. At the higher end, one should start to see features like standard audio cables (instead of manufacturer-specific ones), built in DACs, and a separate control box.
The surround sets include a sub-woofer, and two or more sets of smaller speakers. These support 5.1 or 7.1 standards that allow sound to be mixed not only left and right, as with standard stereo speakers, but front and back and even behind the listener. Movies and video games make use of this technology to provide a more immersive experience. Make sure your sound hardware will support 5.1 or 7.1 before buying such a speaker system.. If your budget allows, you can avoid the computer speaker market entirely and look into piecing together a set of higher-end parts. If you are buying a speaker system designed for PCs, research the systems beforehand so you can be certain of getting one that promises clarity rather than just simple wattage. (Note: speaker power is usually measured in RMS Watts. However, some cheap speakers use a different measure, PMPO which appears much higher.)