In your opinion, what makes a device obsolete? Is it the discontinuation of updates (or the inability to cope with current technology), discontinuation of production, emergence of a new and better technology in the same field, or simply the introduction of a new device of the same range? For example, with the iPad series, every year a new iPad is introduced and most people tend to feel that this makes the old iPad obsolete. But with that aside, older generation iPads still perform pretty well for handling most tasks.
The short answer: when it no longer does what you need it to do.
However, going more in depth with that, you sort of answered your own question at the end. It’s as I’ve always said: better is relative. You choose when to make a device obsolete. If you have an iPhone 3G (as just one example), there are no longer any meaningful updates for it by Apple, but it may still do what you want it to do — so that device, based on your needs, is not obsolete for you. However, if you want to take pictures or video in a higher resolution than the device allows, then that device doesn’t do what you want it to do and is obsolete.
The new iDevices that are launched every year are sold to the audience, at a keynote level, as the newest and most noteworthy product — and that’s what Apple does so well. The company (and any tech company, really) makes you think that your iPad 2 (or whatever shiny new device a company happens to be marketing) is obsolete when it may still do everything that you want it to do. I know of many people who own an iPad 2 and have no problems with it because it does exactly what they want/need it to do. It’s not obsolete because the company or manufacturer says so; it’s obsolete because it no longer does what you need it to do. Period. End of story.
Image: Obsolete? by juliejordanscott (via Flickr)