No matter what the ads say, there are plenty of options an old ( or slightly less old ) Android device could be reused as.
1. Enhance it and keep using it: install a new operating system ( it will definitely feel like having a new phone )
Buying a new phone will not necessarily be a new experience. In case you're staying with the same brand, the feel will be the same, the system will be very, very similar. And it will probably be bigger, which is not always that good. ( My pockets were about the same in the past 20 years and there is a certain problem fitting an 5" screen in there )
If you like your current phone, but it feels a bit slow, it lacks space or even it sounds dull, there is a way make it better.
I had an HTC Desire before my Nexus 4 and I was quite disappointed when it turned out that out of the 512MB internal memory there was ~152MB available for user apps. ( Sounds like the distant past, yet it was only 4 years ago )
It turned out that there are "hacked" Androids that let you use parts of the SD card as memory, or ones that swaps the original user parition with the system partition ( which was ~200MB ) and voilá, the phone suddenly had 4+GB app storage and plenty of space. I had my issues with the install process1, but at the end, it definitely worth it.
Some devices, like HTC and Samsung are unfortunately very protective and does not let you easily change the system; others, like the Nexus devices were planned to be used as development devices as well; those are easy to hack.
If you want to go along with this ( and realize how much faster & better your device could be ), start at "the original" alternative firmware, Cyanogenmod2 - you'll be able to install it through an app, just to make your life easier. Their wiki3 have lots of information as well.
There are other, very exotic, Android based systems as well, like MIUI4. Version 4 was much like a merge of IOS and Android (closed source, but also blazing fast), version 5 was a truly exotic one, version 6 looks really promising. (This is also the official system of Xiaomi phones.)
Disclaimer: since I'm talking about old devices I believe there is no warranty available for them anymore. Reinstalling the operating system on the device may invalidate the warranty in case it still has one.
2. Put it into use in your household: make it a home server!
2.1 Using Android apps to provide server-like features
There are some apps that provide server like functionalities for an Android device, especially if you're about to use the phone functionalities.
- use it as a wifi webcam / security cam with
- use it as SMS gateway server
- Turn your Android Phone into a SMS Gateway8
- turn it into a 3G hotspot
- use it as file or Media server
- use it as media / gaming console ( HDMI out capable devices only )
2.2 Take it one step further: install a full-fledged linux on top of Android
There are applications15 and guides16 to install a full-fletched Debian on top of you Android.
About a year ago I managed to get nginx, PHP-FPM, Percona MySQL server on an HTC Desire which was capable of running a WordPress site. It was slow and I'd rather recommend running something less resource intense but hey, I used my phone as a webserver!
Examples that a phone-server would be good for:
- (rsync) backup server for a small VPS ( 16+GB SDcard is recommended )
- (S)FTP server with dynamic DNS
- mail server
- and anything you can think of…
3. Let someone reuse it
In case you do not want any of those above, but the phone is still functioning or would function with a bit of repair, please don't throw it away; someone else would happily use it and you can help reduce the amount of e-waste we generate.
3.1 Give it away
If you have family members, friends, neighbours who would use your old one happily, give it to them.
3.2 Donate it
Electronic donations can be very useful. Think about it before throwing you working, but worn device away.
3.3 Sell it
You can sell anything on eBay20, even broken devices, as spare parts. Someone might just be looking for a part in your dead device. Start it as a £1 auction and be surprised how long it can go! (Be honest with the description.)
3.4 If it's utterly broken
…there might still be someone to fix it for you or teach you how to fix it. Get in touch with a local Restart Party21, a local Hackerspace22, take cookies with you and talk to them.
4. Why the hassle?
Because even recycling is good, but it's not the best option23.