The "obvious" first guess is that the poor thing is swapping its brain out -- too much data trying to fit in RAM at the same time, so it's paging it off to disk, which is sssllloooowwww... Adding more RAM alleviates this. Most Macs can accept PC-standard DIMMs and SODIMMs, so you don't have to pay Apple's markup. If you're editing video or lots of large photos, anything less than 4 GiB is going to be painful.
Stupid suggestion: Open a Terminal window and run the command "vm_stat 3". This will print the current virtual memory statistics every three seconds. If you ever consistently see large numbers under the columns "Pageins" or "Pageouts", you're swapping too much.
Or if you're not comfortable doing that, download and install iStat Menus
. Turn on CPU, disk bandwidth, and RAM meters. They will give you rough clues what the machine is up to when it goes out to lunch.
If you don't use Sherlock (and let's face it, who does?), then you can turn off disk indexing and save the CPU cycles and disk bandwidth.
Really Advanced Topics: Mac OS X by default swaps to your boot volume, thereby competing for disk space and bandwidth. The swap files can be moved to another volume, relieving some of the pressure on the disk. (From personal experience, however, this doesn't help all that much.)
Über Geeks Only: SSH in to the Mac from another machine. The next time the beachball visits, hop on the ssh session, run 'top' and see who's causing all the fuss.