What is the effect of changing length of crank arms?
If you keep the rest of the bike the same a shorter crank gives more ground clearance at the bottom of the stroke, and that's going to be the main thing most people notice. You're unlikely to notice a change in power output unless you're shorter than, say, 1.7m, which would put you firmly on the down-slope of the power curve (ie, the part where longer = less power). You may notice a change in comfort or pain levels due to the increased joint articulation from the longer cranks. IMO most people would be better off switching from 170mm cranks to 160mm or 165mm cranks.

At the high performance end the power output varies in interesting ways. Since power = torque x speed, and torque = force x radius, a longer crank means more torque but also more leg movement to produce it. And vice versa for shorter cranks. In practice most athletes have a fairly flat relationship between average power and crank length in the range 150-170mm, but it's also something that is little studied.

A study by Martin (2001) suggests that it doesn't really matter:


  Power produced with the 145- and 170-mm cranks was significantly (P &lt; 0.05) greater than that produced with the 120- and 220-mm cranks. The optimal pedaling rate decreased significantly with increasing crank length, from 136 rpm for the 120-mm cranks to 110 rpm for the 220-mm cranks. ... The optimal crank length was 20% of leg length or 41% of tibia length. ... Even though maximum cycling power was significantly affected by crank length, use of the standard 170-mm length cranks should not substantially compromise maximum power in most adults.


I found some thought experiments and this interesting summary/bibliography. (edit to add) Ian Sims at GreenSpeed has long had an interest but I can't access their site right now, so here's an A2B magazine post. It's worth noting that Ian has changed his position completely, based on evidence that he mentions in that article. Previously he was a fan of long cranks, now he's suggesting that short ones work better.

Edit by mattnz replacing Mσᶎ's link: PowerCranks have an interesting sales push with useful links and discussion.  They also provide test results showing advantages of short cranks. Apart from being benificial to people with poor flexibilty and knee problems, short cranks provide major racing benefit from improved aerodynamic position. They also discuss why its a myth you need long cranks for climbing. 

(moz again) My experience is that shorter than conventional cranks work better than I expected and reduced my knee pain somewhat when riding hard (long tours or fast commuting for 40+ km/day). I'm 1.8m tall and ride 155mm cranks because those are the shortest I could get without paying a price premium. My partner is 1.5m tall and prefers 145mm cranks. Going up to the 165mm cranks on my load bike feels like a significant jump, but I haven't tested them because I don't have access to a power meter.