Why are we still using CPUs instead of GPUs?
TL;DR answer: GPUs have far more processor cores than CPUs, but because each GPU core runs significantly slower than a CPU core and do not have the features needed for modern operating systems, they are not appropriate for performing most of the processing in everyday computing. They are most suited to compute-intensive operations such as video processing and physics simulations.
GPGPU is still a relatively new concept. GPUs were initially used for rendering graphics only; as technology advanced, the large number of cores in GPUs relative to CPUs was exploited by developing computational capabilities for GPUs so that they can process many parallel streams of data simultaneously, no matter what that data may be. While GPUs can have hundreds or even thousands of stream processors, they each run slower than a CPU core and have fewer features (even if they are Turing complete and can be programmed to run any program a CPU can run). Features missing from GPUs include interrupts and virtual memory, which are required to implement a modern operating system.
In other words, CPUs and GPUs have significantly different architectures that make them better suited to different tasks. A GPU can handle large amounts of data in many streams, performing relatively simple operations on them, but is ill-suited to heavy or complex processing on a single or few streams of data. A CPU is much faster on a per-core basis (in terms of instructions per second) and can perform complex operations on a single or few streams of data more easily, but cannot efficiently handle many streams simultaneously.
As a result, GPUs are not suited to handle tasks that do not significantly benefit from or cannot be parallelized, including many common consumer applications such as word processors. Furthermore, GPUs use a fundamentally different architecture; one would have to program an application specifically for a GPU for it to work, and significantly different techniques are required to program GPUs. These different techniques include new programming languages, modifications to existing languages, and new programming paradigms that are better suited to expressing a computation as a parallel operation to be performed by many stream processors. For more information on the techniques needed to program GPUs, see the Wikipedia articles on stream processing and parallel computing.
Modern GPUs are capable of performing vector operations and floating-point arithmetic, with the latest cards capable of manipulating double-precision floating-point numbers. Frameworks such as CUDA and OpenCL enable programs to be written for GPUs, and the nature of GPUs make them most suited to highly parallelizable operations, such as in scientific computing, where a series of specialized GPU compute cards can be a viable replacement for a small compute cluster as in NVIDIA Tesla Personal Supercomputers. Consumers with modern GPUs who are experienced with Folding@home can use them to contribute with GPU clients, which can perform protein folding simulations at very high speeds and contribute more work to the project (be sure to read the FAQs first, especially those related to GPUs). GPUs can also enable better physics simulation in video games using PhysX, accelerate video encoding and decoding, and perform other compute-intensive tasks. It is these types of tasks that GPUs are most suited to performing.
AMD is pioneering a processor design called the Accelerated Processing Unit (APU) which combines conventional x86 CPU cores with GPUs. This approach enables graphical performance vastly superior to motherboard-integrated graphics solutions (though no match for more expensive discrete GPUs), and allows for a compact, low-cost system with good multimedia performance without the need for a separate GPU. The latest Intel processors also offer on-chip integrated graphics, although competitive integrated GPU performance is currently limited to the few chips with Intel Iris Pro Graphics. As technology continues to advance, we will see an increasing degree of convergence of these once-separate parts. AMD envisions a future where the CPU and GPU are one, capable of seamlessly working together on the same task.
Nonetheless, many tasks performed by PC operating systems and applications are still better suited to CPUs, and much work is needed to accelerate a program using a GPU. Since so much existing software use the x86 architecture, and because GPUs require different programming techniques and are missing several important features needed for operating systems, a general transition from CPU to GPU for everyday computing is very difficult.
What makes the GPU so much faster than the CPU?
The GPU is not faster than the CPU. CPU and GPU are designed with two different goals, with different trade-offs, so they have different performance characteristic. Certain tasks are faster in a CPU while other tasks are faster computed in a GPU. The CPU excels at doing complex manipulations to a small set of data, the GPU excels at doing simple manipulations to a large set of data.
The GPU is a special-purpose CPU, designed so that a single instruction works over a large block of data (SIMD/Single Instruction Multiple Data), all of them applying the same operation. Working in blocks of data is certainly more efficient than working with a single cell at a time because there is a much reduced overhead in decoding the instructions, however working in large blocks means there are more parallel working units, so it uses much much more transistors to implement a single GPU instruction (causing physical size constraint, using more energy, and producing more heat).
The CPU is designed to execute a single instruction on a single datum as quickly as possible. Since it only need to work with a single datum, the number of transistors that is required to implement a single instruction is much less so a CPU can afford to have a larger instruction set, a more complex ALU, a better branch prediction, better virtualized architecture, and a more sophisticated caching/pipeline schemes. Its instruction cycles is also faster.
The reason why we are still using CPU is not because x86 is the king of CPU architecture and Windows is written for x86, the reason why we are still using CPU is because the kind of tasks that an OS needs to do, i.e. making decisions, is run more efficiently on a CPU architecture. An OS needs to look at 100s of different types of data and make various decisions which all depends on each other; this kind of job does not easily parallelizes, at least not into an SIMD architecture.
In the future, what we will see is a convergence between the CPU and GPU architecture as CPU acquires the capability to work over blocks of data, e.g. SSE. Also, as manufacturing technology improves and chips gets smaller, the GPU can afford to implement more complex instructions.
- Virtual memory (!!!)
- Means of addressing devices other than memory (e.g. keyboards, printers, secondary storage, etc)
You need these to be able to implement anything like a modern operating system.
They are also (relatively) slow at double precision arithmetic (when compared with their single precision arithmetic performance)*, and are much larger (in terms of size of silicon). Older GPU architectures don't support indirect calls (through function pointers) needed for most general-purpose programming, and more recent architectures that do do so slowly. Finally, (as other answers have noted), for tasks which cannot be parallelized, GPUs lose in comparison to CPUs given the same workload.
EDIT: Please note that this response was written in 2011 -- GPU tech is an area changing constantly. Things could be very different depending on when you're reading this :P
* Some GPUs aren't slow at double precision arithmetic, such as NVidia's Quadro or Tesla lines (Fermi generation or newer), or AMD's FirePro line (GCN generation or newer). But these aren't in most consumers' machines.