You know it's time to upgrade memory in the new Intel iMacs when it starts to make noise. Every switch between one big program and another involves grinding and endless waiting. Even switching to Finder or Terminal can be interminable. You start regretting keeping all your songs in one iTunes library, or keeping Firefox open with a week's worth of backlogged tabs.
Unfortunately, the stock memory comes as 2 512MB modules. Meaning any upgrade you do means selling or otherwise disposing of one or two old memory chips. You can upgrade from 1GB to 1.5GB by swapping in one 1GB module, or to 2GB by swapping in two 1GB modules. Upgrading to 3GB is way too expensive still, with 2GB modules running from about $600 all the way up to $900+.
The little latch door on the bottom of the iMac screen is easy to get off with a small eyeglass-size screwdriver. The screws are attached to the door so they can't get lost. The old modules come loose when you push on a couple of plastic levers. If you don't seat the new modules firmly enough, when you power up you won't hear the chime and the light flashes steadily. Since you might have to fiddle around with the chips a couple of times, leave the latch off until you've successfully powered up again.
With the extra memory in, you should see an immediate speedup in application switching or user switching. An application like Photoshop can be running a batch job while you switch over to iTunes or Firefox with everything running at full speed and no grinding (technically, paging).