One of the first modifications I made was to fit an intercooler. At the time I wasn't actually sure why I wanted one and it was just an item on my list. In many respects intercoolers seem to be a vital fashion accessory and you will see all manner of heater matrix poking out the front of cars.
Air molecules when banged together, heat up. Pump up a bycycle tire with a hand held pump and you can feel this in action!
The same thing applies to a turbo blowing air into an engine and since hot air contains less gas molecules than cool air, the engine isnt getting as much oxygen as it should do.
An intercooler sits between the turbo and the air intake. Hot air from the turbo passes through the intercooler, which acts like a big radiator and cools the air. The air then becomes denser giving more oxygen to any given volume, this in turn burns in the engine, making the power.
One bar or 14.7 PSI of boost increases the air temperature by around 60 degrees Celcius, while every 37.8 degrees Celcius reduction in air temperature increases air density 12 - 13 percent.
The most common kind of intercooler is air to air, these are light and simple (although you can get fluid intercoolers). The are usually positioned at the front of the car behind the grill, where they can get a good flow of cooling air right through the front bumper. With the skyline there is some modification to do and a large chunk of front bumper has to be sacrificed in order to fit. It is possible to fit a larger R34 side mounted intercooler in the position of the original one. Although this is only good for around 300 BHP. So the size of intercooler is important, too big and the turbo will take a long time to fill the intercooler with air. Delaying throttle response.
I have seen on Subaru's that they use top mount intercoolers on WRX's at least. I would assume that this is not ideal, suffering from heat soak from the engine and degrading the intercoolers function. However they would have the advantage of being located close to the engine, not requiring long connecting pipes that can degrade throttle response.