When I started first year uni, I bought for myself an AMD K6-2 based 'puter with 64mb ram, CPU ticking over at an amazing 333(ish)Mhz, a whopping 6Gb of disk space, a 36x or so CD drive, 10mb ethernet..
This all cost about $2000AUD (including about $400AUD for a monitor), was in a standard mini-tower configuration, and ran reasonably well.
That was 1999. In 2005, you can get a similarly specced machine (with bluetooth, without the disks or monitor) for just $190USD - and it's the size of a stick of gum!
Even more ridiculous: my current 'desktop' machine is a midi-tower. It's an Athlon400, overclocked to run at 450. I know that when I bought this, the case, CPU, power supply, and mobo alone set me back on the order of $1000.
I'm about to buy (assuming I win the auction) a machine that's much much smaller, with a CPU roughly twice as powerful, for a little over $100 - and that's including shipping. This should complete my project mentioned last night nicely - I'll transfer my RAM and HD to this new machine, and it can sit quietly in a corner somewhere, running as, essentially, a network storage appliance. w00t!