Although one thing you want to avoid is using frames in such a manner that the content of the site is in the frame and a menu is outside of the frame. Although this may seem convienient, all of your pages become unbookmarkable.

Iframes can have similar issues as frames and inconsiderate use of XMLHttpRequest: They break the one-document-per-URL paradigm, which is essential for the proper functioning of the web (think bookmarks, deep-links, search engines, ...).

The most striking such issue is probably that of deep linking: It's true that iframes suffer from this to a lesser extent than frames, but if you allow your users to navigate between different pages in the iframe, it will be a problem.