How a turbo works

1) puts oxygen in the cylinders 

2) puts fuel vapor in the cylinders 

3) ignites the mixture with a spark 

4) Explosion! piston goes down 

5) pushes cylinder contents out the exhaust 

6) return to step 1 

A turbo helps you out with step 1. With a normally aspirated (NA) engine, it is the atmospheric air pressure which pushes the air into the cylinder to fill the vacuum created by the piston going down. The turbo is an air compressor which pushes more air into your intake manifold. But compressing air takes energy. The turbo runs off of the thermal energy (hot air) your engine normally throws away out the exhaust. 

Think of two paddle wheels connected by an axle. Exhaust spins one wheel, and the other wheel spins to compress air. This theoretically makes your engine not only more powerful, but more efficient. Of course, this depends on the turbo you put in your car. Most turbo kits or upgrades concentrate on producing power, which generally takes increased fuel consumption, but if it's any consolation, it's efficient increased fuel consumption. 

As air is compressed, it heats up. The intercooler is designed to cool the air going into the compressor, so that denser air goes into the engine. Denser air means more oxygen, and cooler air means less detonation, allowing you to run higher levels of boost. Intercoolers are recommended for applications above 6 psi. 

Which brings us to step 2. For a limited amount of boost (like 6 psi), you can get away with the stock components in your engine delivering fuel and spark. However, as you increase boost, you will not have sufficient fuel to match all the oxygen you are now stuffing into your cylinders. This means your air/fuel ratio goes up, and your engine runs lean, causing detonation. Engine detonation is a different kind of "explosion", and should be avoided at all costs. So, at boost levels above 6 psi, it is recommended that you upgrade your fuel pump and above 10 psi, your injectors.

With all this extra oxygen and fuel running around your cylinder, your stock ignition may not be sufficient to ignite everything, and you may run lean anyway. Upgrading your ignition with a spark amplifier, coil, and wires always helps performance to some extent, but becomes necessary when running boost.  Some ignitions have a boost-dependent retard function, which retards your ignition timing in real time as the boost climbs in your engine. 

The factory CPU is not the ideal solution for programming a turbo car because it was made for an NA application, and it is difficult to reprogram as your setup changes. The ideal solution is a separate programmable unit like DFI, TECII, or Motec. These control your fuel and ignition very precisely, are easy to reprogram, and can be more closely tailored to your specific turbo application. However, while these will run fine on the street, they are generally considered to be most useful for race applications. 

Which brings us to step 4. Say you are running a big turbo with plenty of boost, fuel, and spark. The connecting rods inside your engine at some point (like above 10 psi) cannot handle all of this fun new power. They will bend, break, or just make a graceful exit out of the engine. This is yet another kind of  breaking problem which must be avoided. You have to use connecting rods.

Also, increased boost increases the chance of spontaneous detonation which may occur when the piston comes up to compress the mixture in the cylinder, but before the spark plug does anything. There are special pistons which minimize this problem, and lower the (NA) compression in the engine as well. Why would you want to lower compression, you ask? Because although lowered compression by itself means less power, with a turbo it means you can run even more boost without detonation, for a net gain. However, you pay the price of low-end (low-RPM) power. Proffessionals says that 9:1 pistons are best for street applications, since it will have more low-end power and make the turbo spool up more quickly than 8:5 or 8:0 pistons, which are used more for racing. Stainless steel valves are also sold for turbo applications, but these are mostly needed for high-hp nitrous, or turbo+nitrous, setups.

Airflow

Which brings us to step 5. Turbo owners are always asking themselves, "how can I run more boost?". If you want to increase boost more than 15 psi, the first thing you have to do is run race gas. However, this may very well burn up your sensor. In fact, all kind of things can break at stratospheric boost levels, from gaskets to cylinder heads. It costs a lot to either take precautions or fix broken parts (your choice; actually, you'd probably end up doing some of both), but fortunately there is an alternative. It turns out that all this added airflow makes every other modification that much more valuable. Since your turbo is forcing that much more air into and out of your engine, freeing up intake and exhaust is that much more helpful, as is just about every other modification. Also, putting your car on a dyno for an hour or so is invaluable for getting everything to work together optimally. You may find you are running too much or too little boost, fuel, or retard, or that you have a leak, or that something like a wastegate isn't working. It costs like €100/hour depending on where you go, and may both save your engine and make it run much stronger.

Summary: How to Make Power without Engine Breaking 

1) Get a boost gauge and an air/fuel gauge, regardless of psi. Otherwise, you have no idea what is happening inside your engine. Don't assume that you are making the expected amount of boost; you may be making much more or much less. And don't assume that you are detonation-free if you don't hear knocking. A gauge is your best bet to ensure that the air/fuel ratio is optimal.

2) For more than 6psi boost, upgrade your ignition and fuel system, and get an intercooler.

3) When making more than 10psi boost, upgrade your engine internals.

4) Let your engine breath, with intake, header, exhaust, etc.

5) Tune it on a dyno.

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