The Processor, sometimes referred to as the CPU or Central Processing Unit, is the main component of a personal computer, along with the Motherboard and RAM. Without the processor, nothing can be processed; the system will not even produce beep codes for malfunctioning hardware during the POST without a processor installed.
There are currently two main consumer manufacturers of processors; Intel, and Advanced Micro Devices, commonly abbreviated as AMD. However, there are many other manufacturers of processors that fulfill difference business and enterprise needs, such as International Business Machines (IBM), Qualcomm, and Motorola.
Processors are one of the main (but by no means only) guages of a system's performance. Previously, processors were weighted purely on raw computational power, which was very important for processors with a single core. However, Intel encountered a brick wall with the Intel Pentium 4; Intel were developing a technology called NetBurst, which Intel famously proclaimed could run as high as 10 GHz. However, the company encountered cooling problems with speeds beyond 3.80 GHz, with even 4.0 GHz processors needing non-stock cooling implementations to run correctly.
This led to companies investing in technologies to shrink the core sizes down, and allow for more cores to be present on the same chip. The Intel Pentium D was the first such offering from Intel, however, this was two CPUs effectively bolted together, rather than two cores on the same die. AMD would later produce the AMD Athlon 64 X2, which set the stage for all future dual-core development.
One of the other major advents in technology has been the switch to 64-bit computing. Processors have been getting steadily more complex since their creation, and early Windows and MS-DOS installations ran on a 16-bit processor. Later advances would see Windows switch to 32-bit processors (termed x86), and later to 64-bit processors (termed x64, or x86-64 to refer the the ability to simultaniously run 32 and 64-bit code). Intel created the first 64-bit mass-market processor, the Intel Itanium, aimed squarely at the enterprise market. First iterations of the Itanium included a speed penalty for running x86 code, at 10% of normal speed. It also used the IA-64 instruction set; outside of some Microsoft operating systems and Linux distributions, IA-64 was never widely adopted.
The breakthrough came when AMD created the AMD Athlon 64. For the first time, users were able to run both legacy 32-bit code (including operating systems), and also run 64-bit code. Many users made the switch quickly, in part because the change to the architecture allowed the operating system access to a greater amount of system memory (x86 system could only address a maximum of 4 gigabytes).