In keeping with the discussion I thought this is was a good summary taken from myturbodiesel.
Common turbo myths dispelled
The biggest myth is that every turbo car can make more power just by turning up the boost. Boost is only a measure of intake pressure. Pressure can only be created when there is resistance from a restriction.
Everything else being equal and within reasonable limits for the setup, more boost makes more power only if the turbo is operating in an efficient range of performance and if the rest of the setup can benefit from it. Most turbocharged cars have a little room to safely increase boost. If you were to increase the boost to the point where the turbo is trying to move too much air, it actually reduces performance. This is because past the point of diminishing returns, a turbo is basically blowing hot air. This hot air creates intake air pressure and more boost because boost = measure of pressure. Again, back to the idea of volumetric efficiency, you want the maximum mass of air for the engine. Unless the air can be cooled sufficiently by the intercooler, the density of the air might actually be less than it would have been at a lower boost level. This psi level of diminishing returns is different for every setup and every car and even varies by ambient conditions. At that point, some modern cars compensate by using their computer and sensors to adjust the timing to prevent detonation. The TDI engine car computer has air temperature and pressure sensors and a program that will prevent increased power if the only change is increased boost. You need a chip or other performance enhancement to increase fueling, see 1000q: basic performance upgrades for the TDI for more details.
Again, it is a common mistake to equate boost, or intake pressure, with denser air. Assuming the other variables are constant, the ideal gas law PV=NrT shows that if you raise pressure, temperature increases. Also keep in mind the above paragraph about operating a turbo outside of its areas of efficiency. It's easy to get so caught up with quick power gains from more boost pressure that one can forget that the ultimate goal of turbocharging is increasing air density, not just pressure. In designing the engine as a whole system, you want to create the same amount of power with the least amount of boost, within a range, to reduce stresses on the engine and turbo and to keep air moving at a reasonable speed throughout the intake tract.
One more time: boost pressure is a measure of intake restriction. You could put a choke in the intake air path and that would also create boost (but reduce power). A turbo moving a lot of air but showing relatively low boost on a boost gauge means there is low air restriction in the intake air path. Remember, the goal in increasing power is to move more air, more efficiently, not just create boost. Changing camshafts to allow more air into the combustion cylinders, changing the combustion cylinders by boring and making the diameter of the cylinders wider, or stroking the engine and making the length of the piston travel longer, can all increase the amount of air moved.
Adding a larger turbo does not mean the engine will make more power. In a modern car, the turbo is regulated by sensors, computer feedback, and solenoids set to control the boost at a certain pressure. The computer measures the pressure with sensors normally at the intake manifold or some spot right before the intake manifold. Everything else being equal (load, rpm, etc), one large turbo and one small turbo will flow identical pressures of air at a given psi but remember that psi is just a measure of pressure - air mass is what matters and is what makes power!
Here is an example: to flow a certain amount of air, where a smaller turbo may have already passed its maximum efficiency and is blowing mostly hot expanded air, a larger turbo will still be operating in its area of maximum efficiency and is moving cooler denser air at the same psi. Again, assuming that one turbo is stressed too much and the other is in its peak efficiency, they are both giving the same psi but not the same density of air. 20 psi is always 20 psi, the difference between an efficient turbo and a turbo blowing hot air is the temperature of the air coming out of the turbo which affects density. 20psi of 50oC air is not the same as 20psi of 14oC air. There are also other factors that effect this such as the size of the turbo housings, backpressure, etc.. You want to select a turbo which balances responsiveness with moving your desired mass of air. Do a lot more research and consult your performance and parts vendor before crunching the numbers and selecting a turbo setup. The same turbo on a 4.0L engine will respond totally different than on a 2.0L engine.