If it has sentimental value, I tend to keep it. I have a drawer of clothes I don't wear. Some are autographed T-Shirts, but others are shirts from my childhood (the first shirt I ever paid for because my mom wouldn't buy me a band t-shirt - Hanson; t-shirts I got through cadets, etc).
But if it's a favourite pair of jeans that are thread bare? Into the trash they go.