I also don't pay too much attention to age recommendations. I have a 2.5 year old son, and the most recent "toy" I purchased was a "My First Clock" meant for 6 year olds. Mainly I wanted it so he could see the gears working when he turned the knob on the back (plus I got to put it together, which was fun for me

, and I figured he could put it together when he's older). It's not really a "play" toy, but it is something that I knew he would find interesting (he did, and loves to interact with it). I've also purchased toys that were designed for children younger than his age because I felt he could work on the skills required for those toys.
Generally when I see recommended ages, I figure it's a liability issue lol. Probably not the best attitude, but that pretty much sums up how I see it. Nonetheless, I also agree with Zack_Jenn about how age recommendations would be helpful. Before I had kids, I wouldn't have a clue what to buy for a young relative, and the age recommendations made it much easier. Now that I'm "in the know" lol, I can select toys for my son based on what I know about him.
As far as what happens to a toy after the age limit has passed... I still incorporate them into the rotation because there's usually something else we can do with them. The $7 shape sorter we picked up before he was one still gets action! We can talk about the names of the shapes, we can place them in a bag to see if he can tell the shape just based on how it feels, we can sort them by color, by shape, stack them, build with them, I could go on...
Hope this helps!