Datatype sizes; a space and speed issue?

Hi again,

   Something I have been wondering about and haven't found an answer to
yet is how the size of a datatype (I hope that is the right term)
effects performance. What effect is there if I specify "TEXT" instead of
say "VARCHAR(255)"? How much benefit is there do being more aggresive
and say cutting it in half again by using "VARCHAR(128)"?

   I hope this isn't too basic a question! Thanks!

Madison