The ondemand governor is tunable. See parameters in the directory /sys/devices/system/cpu/cpu0/cpufreq/ondemand/.

It might be possible to improve performance and still keep most of the power saving features with a slight tuning.

You can see here for an explanation, though it is for a slightly older kernel than 2.6.21:
http://ftp.kernel.org/pub/linux/kern...mand-paper.pdf

There is also the conservative governor which is also changing frequency according to demand, but with a different algorithm.

Before there was ondemand governor (in kernel), there were a few userspace daemons (powernowd, cpufreqd, etc.). For example, cpufreqd allows setting speed by running appliacations.