I heard a huge pop last year from my computer whilst I was busy installing windows. I ran to the socket and flipped the switch. I was actually quite shaken by this. It was so loud that downstairs came rushing up to find out what the noise was. I thought it my PSU - in fact, I found out that my DVDRW had died and took my windows CD with it! *shakes fist*
Anyway, back on topic - it's always a good idea to replace a cheap PSU every few years, as I don't trust them to last for much longer than this. I've seen blue sparks from the best, but this is usually a loose connection or something.