You have to understand WHY more RAM can improve performance. Your OS will use the hard drive as a "swap file" or virtual memory if your PC runs out of RAM while you are working away. Using your hard drive as memory causes a serious performance hit, as hard drives are way, way slower than RAM. So, the trick is having enough memory, adding more does not help if you are doing nothing that needs more memory. Today, with a modern PC and a modern OS, you need about 4 gig to achieve this for most standard users. If you do graphic work, video encoding, work with a lot of applications at once, then more memory than even 4 gig may be better. The trick is you want enough main memory (RAM) so the OS doesn't start using the hard drive as memory, that is all.
Also, to address more than 4 gig of RAM, you must have a 64 bit OS installed. If you are only using a 32 bit OS, it will only be able to use about 3.5 gig of memory. So installing more is pointless, it cannot be used.
many people do indeed increase it to 8gb or 12gb, for example i find myself wishing for more ram when i can't run 3ds max and 30 tabs of chrome at the same time. When a normal windows 7 install is on idle, it uses about 1gb of ram. I have found that even on idle, my paging file (swap space) is still being used, but it is true having free ram speeds the opening of programs. Its kinda like saying windows doesn't use your processor to 100% the whole time, so why get a faster one? Moral of the story IMO, ram is a good investment.
With RAM when you don't have enough adding more makes a big performance improvement (You can check in task manager if you are typically using most your memory). As you add more memory your OS and some other programs will utilize some of this extra memory to make things perform somewhat better. However, there is a decreasing return.
As an example if you typically peak out at lets say 3 GB of RAM used then going from 4 to 8 will make your system a bit more responsive, but I highly doubt that if you use 3GB and you currently have 8GB upgrading to 16GB won't show much improvement (unless you end up going with a RAM disk).