You can remove the old kernels if you want, through your package manager or manually, depending on how you installed the new kernel and what your package manager is willing to do. Or you can just remove them from the list (in the case of Grub it's /boot/grub/menu.lst or in the case of LILO it's /etc/lilo.conf).
There are various reasons why you would want to have several kernels. One is what you mentioned yourself: if something is wrong with the new kernel, you can (possibly, depending on what you've done with the kernels) just boot to an older, working one and fix things without needing to use live-cds or such. Or you might have uses for different types of kernel; you could have one "generic", one customized for certain needs, another one customized in a different fashion, or maybe just a 2.4 series and a 2.6 series kernel, if you needed them both for some reason.
Most of the time, if you're not doing anything exotic, you just need one kernel and prefer the "latest&greatest". So go that way: upgrade your kernel when your distribution says you can, remove the old one (after you've booted into the new and see that it works fine) and so on. If you don't know why you needed more than one kernel, you probably don't
Disk space consumption should not be an issue, as the kernel itself isn't actually big in today's terms. Of course if you have a very small system with very small resources and every bit is important, there's no sense having unused kernels on disk, but if you're one of today's "normal" computer owners who happen to have a 500+ gigabyte harddisk, you could just as well store every single kernel you ever meet and never run out of disk space (well to be precise, when /boot runs out of space, you obviously can't have more kernels in it -- but in a lot of cases /boot actually resides on the same partition as / (root) and it's nowadays made pretty big..of course it's possible to run out of space, but I never have).
See what's in your system's /boot directory, and take a look at /boot/grub/menu.lst or /etc/lilo.conf depending on which bootloader you use to get a quick view on what you have.
Having several kernels does not mean the same as having several operating systems (i.e. not the same as having several XP ServicePack systems), because the operating system is not the same as it's kernel -- GNU/Linux operating system is not just the Linux kernel, but all the other things (including software) around it too. Having 7 kernels doesn't mean you have to have all your software installed 7 times simultaneously; no matter which kernel you boot, the same installed software, filesystems etc. are used -- same /home, same Firefox, same files as with the other kernels.