The way that upgrades are designed are to balance the following two choices:
1) Should I upgrade my units?
2) Should I just build new ones?
In Civ 3, it was ALWAYS #1. In Civ 4, it's much more balanced. There's incentives for each.
1 >> If you save up 1000 gold (often from a Great Merchant), you can upgrade all kinds of units within a SINGLE TURN. Since Civ 4 makes the window of opportunity for war much shorter, this can be huge. You also get those promotions.
2 >> Building new units makes sense if you don't have the cash lying around, and if you don't have any desire for a snap war.
The same people who always do #2 are the same people who complain that they don't have enough time to use their units and the game goes too fast. They ought to try #1 every once in a while.