First, you have to make sure there's nothing on the hard drive that could be used against you. You don't want anything with a credit card or Social Security number falling into the wrong hands.
Deleting files or formatting hard drives isn't good enough I'm afraid. The data may still be on the drive, where anyone with moderate technical abilities can retrieve it. You need to wipe the data, write over the physical clusters to make sure it's all gone.
Ask yourself these 2 questions
Do I want to wipe the entire drive or just select files and folders? Wiping the drive is easier (you don't have to decide what to delete), but someone will have to reinstall Windows, drivers, and so on afterwards so if they know what doing and have technical know-how, they may pry into the drive to see what is there.
How paranoid am I? There are plenty of free programs that will wipe your data so that it cannot be recovered by anyone other than a very skilled professional using very expensive, specialized hardware. For most people, that free software is good enough.
If you want to wipe files and folders with a reasonable degree of security, I recommend Summit Computer's free Hard Disk Scrubber 2 for the job, but if you like FREE products, like me, then there is Active Kill Disk, The free version is good enough for most people.
Once you've wiped the hard drive, what do you do with the old PC? There are plenty of possibilities, most of them not worth doing. Here are a few I think you should avoid:
Computers drop in value quicker than anything except milk. Whatever you get for it won't be worth the hassle.
Turn It Into a Print Server.
Yes, you can hook up the old PC to your network, plug the printer into it, and leave it on all of the time so that other computers can print through it. But it's big, bulky, and sucks power. It's easier to plug the printer into one of the computers already on your network, and leave that PC on 24/7.
Throw It Away.
There are too many computers in landfills already, and there's material in a PC that you don't want in your groundwater. Finally, there is someone in the world who could use your computer.
The best possible way to get rid of an old PC is to give it away. But to whom?
Is there anyone in your family who needs a computer? Or a better one? Remember, your outdated model is another person's upgrade and I like that particular approach myself.
Call your local school or school district and ask if they're interested. Most likely you'll get transferred to someone who knows enough to ask intelligent questions. Of course, after asking those questions, they might just turn you down. Many schools don't want a computer unless it is in working condition, comes with a legitimate copy of Windows (they don't want to run afoul of Microsoft), and are not too old.