I regularly use Lithium Polymer (LiPo) batteries for radio-controlled aviation. Because this question gets asked so much, I've summarized my care guidelines for extending LiPo lifetimes when used in an R/C application. Our usage pattern is weird (long storage, extremely high drain and frequent recharge for a day, then back in storage again) compared to traditional Lithium usage in low-drain devices like cell phones, PDAs, and laptops.
Lithium lifetime is based on several factors:
1. Temperature while in use
2. Temperature while in storage (for our purposes, "storage" is the same as "maintaining a constant voltage level")
3. Percentage of "full charge" (4.20v/cell) to which a cell is charged
4. Percentage of "full discharge" (depending on chemistry, somewhere between 2.5v and 3.2v) reached by a cell
5. Rate of charge (depending on chemistry, betwen 0.3C and 3C may not be excessive)
6. Rate of discharge (depending on chemistry, up to 20C may not be excessive)
7. Charge level while in storage
Number 7 should not be neglected. If kept at room temperature or above, if you store your batteries at full charge you should expect 20%-40% capacity loss per year. Storing Lithium batteries near freezing prolongs their storage lifetime immensely (2%-4% capacity reduction per year!); if you must store your batteries fully charged, store them in a refrigerator.
Ideally, store them at 40% capacity (approximately 3.7-4.0 volts per cell, depending on C-rating and chemistry) in a cool place.
When I follow good LiPo care guidelines, I find that my LiPos last longer. In some cases, even cheap Chinese packs last well and deliver for a long time. If I abuse them, even a little bit, they go sour fast. Don't leave them sitting in your garage during the summer, for instance. I can testify to how bad that is for batteries.
My guidelines for LiPo longevity:
* Keep the discharge as low as possible.
* Keep the temperature at which the battery is stored as low as possible, above freezing.
* Store LiPos partially discharged.
* Ensure the LiPo never breaches 130 degrees Fahrenheit; if it does, you are discharging too fast or have inadequate ventilation for your application. At 140 degrees, you have caused permanent damage to your battery, and at 180 degrees that was the battery's final flight.
* Do not exceed 12C burst and 6C-8C average discharge, despite the manufacturer's reassurances regarding higher discharges. This equates to approximately an 8-10 minute flight before hitting the 3.0v or 3.2v cutoff (12C and lower batteries usually use a 3.0v cutoff. 15C and higher batteries usually use a 3.2v cutoff.)
*Treat the "C"-rating as "how cool do these batteries stay in flight at 6-8C discharge?" and "what's my maximum burst rating?".
* Partially charge and partially discharge. That pack's at only 4.15v/cell? Pop it off the charger and use it, adjusting the timing of your flight to match the fact you have less capacity!
* Set the LVC higher than you need. For instance, although a Common Sense R/C 15C 2100mAh pack suggests a 3.0v cutoff, at that point with an 8C discharge you are really falling off the voltage cliff. A 3.2v cutoff represents a 90% discharge, which is quite a bit more than you want to discharge for maximum pack longevity but still safe for a 200-cycle-ish target. I wish more ESCs would offer adjustable LVCs so that you could dial the rate in to exactly where your 80% (or so) shelf is, and begin oscillating your motor when you hit that point.
* Invest in a DVM (Digital Volt Meter), in-flight data logger, and a small spiral-bound paper notebook. Log your flights, and analyze your discharges periodically to adjust your flying style and timer settings to keep in-line with your batteries' reduced capacity over time.
Reasonable-quality batteries, if properly treated, should deliver 200+ cycles. That said, most people charge in hot garages, charge their packs while hot, over-discharge, over-charge (this is very common with packs charged at night to 4.2v... the next day, they are at 4.2+ due to warming decreasing internal resistance!), and in general abuse the crap out of the packs due to not knowing how to care for them. In those cases, 100 cycles is a reasonable estimate for virtually any pack.
When figuring pack cost for the year, I plan on 100 cycles. If I get more, that's a bonus, not a requirement. I pretty much exclusively fly cheap batteries (less than $50 for 2100mAh 3S), though; A-list batteries (Kokam, Thunder Power, most Korean-made and Taiwanese-made batteries, not the Hong Kong Krap I purchase) seem to last substantially longer with less care for many people.