Manage large lists for performance (MOSS)

SharePoint Products and Technologies support large lists. However, you must carefully control how end-users view the lists to help prevent adverse effects on performance.

For best performance, do not exceed 2,000 items in a list level (for example, the root of the list or a single folder).
If you must create and browse large lists, use the following best practices:
Index the list on one or more columns.
Change the default view of the list to a customized filtered view that follows these recommendations
- The view returns fewer than 5,000 items
- The first column that you use to filter the view has an index and that it sufficiently reduces the total number of items returned.
- The view displays only those columns that are absolutely required.
- The view includes as few lookup columns as possible. Each lookup column in a list that is included in a view causes an additional join and additional calls to the database.
Evaluate list size with regard to the number of columns in a list. Lists with lots of columns can perform slowly.

Be aware that the following settings and operations can significantly affect the performance of a site that has large lists.

Complex explicit permissions (permissions on the list or library, folder, or item or document level) force authorization checking on each item.
Changing authorization settings.
Creating, updating, and deleting indexes.
Importing and exporting content.
Deleting a list.
Deploying new content types or updating existing content types.
If you have workflows that generate lots of task and history items, you might be creating large lists. For very active workflows, follow these practices:
Keep the AutoCleanupDays timer job running to clean up tasks on completed workflows older than 60 days.
When you create workflow associations, if you expect that a workflow will be heavily used or will create lots of task and history items, use non-default task and history lists.

Please be aware that if you have a site that uses large lists, it can slow down the performance of site collection backups performed with the Stsadm backup operations.

More info http://technet.microsoft.com/en-us/magazine/2009.08.insidesharepoint.aspx