The above is a great explanation of how Windows' backing store works. Those of you who think the pagefile should be reduced or eliminated via various tweaks and hacks - please read it twice! And if it still doesn't make sense to you, check out this Anandtech article, where the entire paging file was moved to a hardware RAMdisk. Was it any faster than just adding that amount of normal RAM and usung a hard disk pagefile? No.
Seriously, before you start messing around with pagefile/swapfile settings, do a little measurement. Fire up perfmon, and monitor the counter "Memory - Pages Input/sec". This will specifically graph hard page faults, the ones where a read from disk is needed before a process can continue. Soft page faults (which are the majority of items graphed in the Page Faults/sec counter) aren't really an issue; they simply show items being read from RAM normally.
If after graphing "Memory - Pages Input/sec" for a few minutes, your graph looks like the one below, your system is fine. Page-ins from disk are pretty rare, and tweaking will likely hurt your performance more than they will help it. If your graph looks a lot jaggier than this one and you have less than a gigabyte of RAM, consider adding more RAM. RAM prices have never been lower - I do not think you will regret it.