Liquid Cooling vs Air Cooling:
What factors should I consider for my system?
Air cooling in desktop PCs
Desktop computers typically use one or more fans for heat management. Almost all desktop power supplies have at least one fan to exhaust air from the case. Most manufacturers recommend bringing cool, fresh air in at the bottom front of the case, and exhausting warm air from the top rear.
If there is more air being forced into the system than being pumped out (due to an imbalance in the number of fans), this is referred to as a "positive" airflow, as the pressure inside the unit would be higher than outside. A balanced or neutral airflow is the most efficient, although a slightly positive airflow results in less dust build up if dust filters are used.
Liquid cooling in desktop PCs
In the past few years, water cooling has become noticed for cooling computer components, especially the CPU. Water cooling usually consists of a CPU water block, a water pump and a heat exchanger (usually a radiator with a fan attached). Water cooling not only allows for quieter operation and improved overclocking, but with improved heat handling capabilities hotter processors can be supported. Less commonly, GPUs, Northbridges, hard drives, memory, VRM, and even power supplies are also water cooled.
Dedicated overclockers will occasionally use vapor-compression refrigeration or thermoelectric coolers in place of more common standard heat exchangers. Water cooling systems in which water is cooled directly by the evaporator coil of a phase change system are able to chill the circulating coolant below the ambient air temperature (an impossible feat using a standard heat exchanger) and, as a result, generally provide superior cooling of the computer's heat-generating components. The downside of phase-change or thermoelectric cooling is that it uses much more electricity and antifreeze must be added due to the low temperature. Additionally, insulation, usually in the form of lagging around water pipes and neoprene pads around the components to be cooled, must be used in order to prevent damage caused by condensation of water vapor from the air on the surfaces at below ambient temperature. Common places from which to borrow the required phase change systems are a household dehumidifier or air conditioner.
Which is right for you?
This depends upon your particular use of the system, and the combination and configuration of the components and airflow in the case, and your own tolerances. Some users who do not intend to stress their systems will operate very well with stock or after-market air cooling. Others who intend to push their system's capabilities regularly may want to consider liquid cooling as an option. Even these users, however, may benefit more from choosing air cooling over liquid as the case design and components used may lend themselves to greater efficiency with air than with liquid.