I probably wipe my Macs once or twice a year, sometimes after a particularly grueling semester of work and screwing around with loads of 3rd party haxies and utilities in the name of TUAW. Each time I go through this hand-washing process, I make sure my continuous backup (thanks to Econ Technologies' ChronoSync) is as up-to-date as possible, and then I wipe the machine clean, installing a fresh copy of Mac OS X. I've always seen the option to 'Archive and Install,' but I never bothered to learn about the process, as I was always worried about how to retrieve files at a later date if I took that path. Maybe this 'clean slate' is a holdover from my Windows days, but I've always felt 'safer' starting with a fresh hard drive (but a guy can change).
If you're not like me and actually are more curious about taking the Archive and Install route, this Apple Support doc will shed some light on how to handle these archived users after all is said and done, as well as how to create a disk image of your previous user directory and then retrieve files from said image. The doc certainly streamlines the process, offering a few simple steps to get your archive on.