Revision 1.01 - December 2008 (will update as necessary)
Building a computer, whether it's for basic home use, graphic design, silicon-crunching tasks like Folding @home or hardcore gaming is essentially the same process. The only true difference is the parts you'll need, how much power you want, and how much the parts cost. Likewise, you can get away with building a machine designed for the higher end and play MMOs on it, but not the other way around. I'm going to offer up three different levels of gaming machine - a budget build (~$600), mid-range (~$900) and power user machine ($1200 or more).
Note: there will be lots of technical terms along the way. It can't be helped! If you have a question about something post a comment.
Part I - CPU Basics
MMOs as a general rule tend to be more dependent on the speed and efficiency of your CPU, as opposed to standard games which tend to require both a great CPU and graphics card (GPU). But having a good GPU will help your MMO experience in places where the CPU is taxed, such as high-traffic zones (Dragon's Aery or Whitegate) or intense PvP/PvE action (Besieged).
Intel or AMD? - This question used to be a toss-up, or even an advantage for AMD a couple years ago with Intel's aging Pentium line. The advent of multi-core CPUs has really changed things a lot though, and Intel made a big comeback. The reasons are really technical, but in plain terms Intel's Core 2 & i7 chip architecture is by far better, faster, and more efficient both in procesing and in power usage (yeah it saves you some money too!). Intel can even price its CPUs so competitively that AMD has been starved out of the market, except for the very low end where Intel still has its underwhelming Celeron line.
How many cores? - As I mentioned, the design of MMOs is more towards raw CPU speed, combined with how good your internet connection is. They do it this way so that the game isn't too hard on your internet connection - if the game was coded like Crysis, it would probably lag you like crazy, even if you have say, a T3 line! So your base line is a high-clock dual core, and depending what else you do or plan to do you can go up to a quad-core and overclock as needed.
Oh yeah I almost forgot - you might be wondering about the difference between the Athlon/Phenom/Core 2 and the Core i7. Pretty easy - i7 is the next-generation CPU that Intel's started making. It's a more streamlined CPU - a baseline of four cores interlinked (I think they plan to go up to at least 8 cores on this architecture), more L2 cache, and a DDR3-optimized memory controller built-in with a plan to eventually include the graphics controller (These last two items have been a feature of AMD's Athlon chips for a few years, which is one of the reasons AMD was going good for a while). This provides a noticeable improvement over the Core 2 series. It also means in what's become an Intel tradition the new CPU comes with a new exclusive socket called LGA 1366 and requires a new, more expensive motherboard that has exclusive new circuitry.
Overclocking - ANY modern CPU can be overclocked easily (made to run faster than their stated speed on the box). This is an advanced technique, even for those who've built their own machines before, so if you plan to do this make sure you read up on it. It's also a great way to save money. You can buy a lower-priced, slower-clocked CPU and overclock it slightly to reach the next level - i.e an Intel E8400 can be easily OC'd from 3.0 to 3.3gHz, which saves you about $100 that'd you pay for the E8600!
This is a great guide that I'll recommend. I'll also recommend you upgrade the CPU cooling fan if you plan to get serious, since the one that comes with Intel's CPUs is just not designed to handle the extra heat. This one's a great choice.
Budget (AMD): AMD Phenom X4 9600 - 2.3gHz - $120
Budget (Intel): Intel Core 2 Duo E7300 - 2.66gHz - $120
Mid-Range: Intel Core 2 Duo E8400 - 3.0gHz - $165 OR Intel Core 2 Quad Q8200 - 2.33gHz - $190
Power User: Intel Core i7 920 - 2.66gHz - $300
Part II - The Motherboard
Next to your CPU, the motherboard (mobo) you choose will be your baseline for the overall speed of the system because a good, fast mobo will allow the parts of your computer to communicate with each other faster. Your choice of mobo will also determine what parts your system can take, and how expandable it can be for future upgrades. Even something as basic as how a manufacturer lays out the stuff on the mobo can make a big difference. For the sake of this guide, I'm going to use the most common gaming computer layout called ATX and use boards with sockets for Intel CPUs (LGA775 for Core 2, LGA1366 for Core i7)
Mobo Brands - They're probably all made in the same Chinese factory for all we know. What's known for certain is that there are some mobo brands that are better than the others, and there's a lot of debate as to who's the best. So to avoid a big dispute, the top 5 brands I look for are Gigabyte, ASUS, MSI, EVGA and XFX.
And for heaven's sake, for gaming purposes DO NOT BUY AN INTEL-BRAND MOBO. Intel boards are fine for the everyday home computer that's used for low-intensity tasks, but they're deliberately not designed for heavy gaming OR overclocking. AND they're typically overpriced in comparison to the other manufacturers' boards, which offer features that make intense games run better and allow a more seasoned computer user or enthusiast to push more power out of their machines.
Chipsets - The chipset is the computer's communcations system. It's split into two parts - the northbridge (NB) and southbridge (SB). The more important one is the NB, and in any case the SB usually follows suit.
The faster the chipset, the faster the computer and possible parts it can use, including the memory and the CPU. There's two common mobo chipset makers - Intel (NBs named G31, P43/P45 and x58 for the Core i7) and Nvidia (NB/SB combo called nForce 6xx/7xx series). Both are perfectly fine though Intel's chipsets are more popular or, in the case of the i7 CPU, exclusive. Personally I have a nForce 680i mobo.
As a side note, your chipset (and board layout) can also determine which brand of GPU you buy if you want to link two or more GPU cards (this isn't very important for MMO gaming though.. one good GPU is good enough). More on that later in the GPU section.
Expansion Slots - You probably already know this one! The number, layout, and type of expansion slots are the best indicator of your ability to upgrade. There's four common expansion slots used today - the standard PCI Express (PCI-E) slot that's bee around for a few years, a smaller version called PCI-E 1x, and a graphics-designed slot called PCI-E 16x which today has a faster 2.0 version. You'll almost certainly want at LEAST one PCI-E 16x 2.0 slot (and you'll want to make sure it's not located at the bottom edge of the mobo because GPUs today usually take two expansion slots!). A second 2.0 spot one is optional unless you want a dual-GPU setup (more on dual-GPU in the GPU section).
This also applies to your memory slots. Usually ATX mobos will come with 2-4 memory slots (6 for the Core i7 boards) and will support a variety of DDR2 memory speeds (DDR3 for Core i7). Depending what you want to spend, and/or how much you plan to overclock, you'll want the speed rating to be higher.
Other - Yeah, there's a lot more to get into like SATA-300, DualGig Ethernet, how many USB ports it has available, sound that's built-in or in the mobo box as a PCI-E 1x card, and so on. But most mobos today will include that stuff in spades.
Budget (AMD): ASUS M3A78 AM2+ AMD770 - $80
Budget (Intel): MSI P43 Neo3-F - $75 (after rebate) or XFX nForce 680i-LT - $100
Mid-Range: Gigabyte GA-EP45-DS3R - $127 OR ASUS P5Q-E - $145
Power User: Gigabyte GA-EX58-DS4 - $245 OR ASUS P6T X58 - $250
More to come...