The O3 and additional pointers optimize the compiled from source apps with those standard flags. You can also specify cpu-athlonxp, etc. This is covered quite a bit in www.gentoo.org
since that's the whole reason for the distribution. The thing is that when you optimize, you creep out a little performance from apps, but you risk their instability because most of these app programmers don't test on those flags.
My suggestion is just pick the right cpu in the kernel, enable pre-emptible kernel, and then install whatever you want. 50 bucks on a 2.6 cpu might not hurt either. If you want performance that's the better way to go with modern distro's. If you want a hobby/new job, then use gentoo and portage and the optimization flags. It's a pretty slick distribution, but the former recommendation will garner you more speed.