Sometimes, you may find it necessary to install or upgrade an application for which an RPM package is not available. Of course, it is certainly possible to do such a thing (in fact, it is the “defacto-standard” way of doing things in the “real” Unix world), but I would recommend against it unless absolutely necessary (for reasons why, see the section called Using the Red Hat Package Manager (RPM)).
Should you need to install anything from tarballs, the general rule of thumb is to place things in your ``/usr/local/'' filesystem. Therefore, source tarballs would be untarred in ``/usr/local/src/'', while resultant binaries would probably be installed in ``/usr/local/bin'', with their configuration files in ``/usr/local/etc/''. Following such a scheme will make the administration of your system a bit easier (although, not as easy as on an RPM-only system).
( Under construction :-p )
Again, I really recommend avoiding tarballs if you can.