What are the risks to overclocking my CPU? What are the risks to overclocking the CPU on one's phone?

Bonus Question: What's the max profile I should set on my Motorola Droid 1 to get the most performance (with no regard to battery life) but without making it explode (if that's even possible)?
You can ruin the processor, your data, and possibly your skin (ouch!).

According to "Risks of overclocking your CPU" [aimed at desktop PCs], the risks include:


Success: The processor may overclock perfectly, and run stably for many years to come. There are thousands of people who have done this, and I am certainly not going to deny it. This is the best case outcome.
Immediate Destruction: It is possible to totally destroy a processor by attempting to overclock it. By destruction, I mean that the processor will not boot at the higher speed, and when returned to its normal speed, will continue to not function. This is basically the worst case outcome. This sort of permanent failure is very rare, but it does happen. It is made more likely by using inadequate cooling, and also by being ridiculously aggressive in how far you try to overclock (i.e., trying to run a Pentium 75 at 166 MHz.)
Non-Functionality: The processor may not work at the new speed, but may work fine when returned to its original speed. This is a fairly common outcome when overclocking, and in most cases the processor will not be any the worse for wear.
System Instability: The processor may boot at the new speed, but you may see the system behave strangely. Random hard lockups, parity errors, resource conflicts, strange hard disk problems, beeping, application crashes and [your OS] refusing to boot are just the tip of the iceberg. Particularly insidious are the overclocks that work almost perfectly, because that occasional crash may be due to your operating system, but it may be due to that overclocked chip also.
Electromigration: When the processor is run at a speed that is higher than it is supposed to be run at, there is a chance that the internal components in the processor may break down over time. The internal features of a CPU are sized in the range of microns. It is possible that when the processor is stressed by running at too high a frequency, along with the extra heat that overclocking incurs, that the actual metal lines inside the processor may form shorts or opens and damage the processor over a period of time. How likely this is to happen, and how long it takes is really not known. The system may work fine for a while and then suddenly stop working.


And don't forget that higher speeds means higher heat -- your tiny pocket-sized squeeze-asmuch-as-possible-into-this-small-area has very little in the way of cooling fins. Speed it up, and you might overheat. Probably won't burn a hole in your pants, though.

However, accordin to "Big Lou" @ 


  Modern processors are not harmed by
  overclocking. You aren't altering the
  voltage, just the multiplier. If
  anything, the Droid will not boot or
  may act funny, but once you revert
  back to a slower clock speed, it will
  be fine (and that's for higher speeds,
  mind you).
  
  Anything up to 1.3 is tested to work
  fine on the Droid. Heat may rise but
  the OMAP3 is rated to around 200
  degrees Fahrenheit. You won't be
  getting anywhere near that, and in
  case you do, you can always set SetCPU
  to roll back the clock speed
  automatically.


YMMV. Note how the original text refers to 75 Mhz Pentiums. ha-hah-ha.

this post @ Overclockers.com covers the SetCPU app, which can adjust speed vs battery performance, start times for clock boosting, etc.