the people who upgrade every cycle are benchmarkers; like dragging racing, but with LN2. some just like to have all the eye candy turned up on higher res than 1080p. or maybe just the next game that comes out is too taxing and need a significant bump like crysis. this is especially true for graphics card that have a usual life-span of 6-8 months before something new comes out and stomps on it.
and to answer overclocking, its to get more performance for less. example, the newest intel extreme processor i7 965 is (usually are) $1000 and clocked at 3.2ghz. however, you can get a $270 i7 920 chip 2.6ghz and overclock it to 4.0ghz with the two chips being especially the same except a few minor details. but for benchmarkers, they usually get the highest chips because they sometimes overclock even further for the bragging rights. lastly, if your stuff is critical say making a movie for a production company or server, overclocking IS NOT recommended because it can cause data corruptuion.