Longer battery life while on-the-move, lower temperatures when not demanding full performance from your computer and prolonging the life of your hardware are just some of the advantages of using the power-saving modes available for your hardware. The "powernowd" service in Linux interacts with the cpufreq kernel driver to govern the processor power-saving mode. You will have heard of AMD's Cool n' Quiet or Intel's SpeedStep technology. You can customize the level of power-saving through the governors/preset modes which are available from the kernel:

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Ondemand- This setting will use the upper and lower limits of your processor's clock speed and fluctuate between them as per your performance needs. So a simple card game will not push your processor beyond it's lowest clock-speed, ensuring that your hardware is using minimum power. Fire up a 3D game and watch the CPU frequency jump to its highest possible value, and use maximum power.
Conservative- This is just like Ondemand, but it's conservative at shifting up a higher gear during demanding loads.
Performance- Fastest speed and highest power consumption.
Powersave- Lowest speed and least power consumption.
On most modern distributions, the kernel has the CPUfreq driver built into it, so simply running the powernowd service is enough to turn on the power-saving mode. If your distro doesn't have powernowd installed (Ubuntu 8.10 does), refer to its documentation to know how to install the service and run it at boot-time. For people who build their own custom kernels, make sure to select cpufreq during kernel configuration and include it as a built-in driver rather than a module.