Because there are so many working things in your power tools, it can sometimes be difficult to precisely ascertain which component is keeping your tool in the infirmary. In the case of brushes, however, your tool will give you a few clear indications that your brushes need replacing.
Before we begin though, I will digress for a moment to give a little shout-out to power tool brushes: despite their small size, your brushes are essentially the backbone to any working motor; they are the tie that binds your power tool and its components, the bridge that allows your power tool perform at its peak, and they will literally wear themselves to nothing to ensure your jobs get completed better. It's a hard-knock life to be a power tool brush, and although it is the nature of brushes to wear slowly, gradually over time, it is because they work so hard that you can so accurately perceive when your brushes require replacement.
Firstly, your power tool will usually loose the spring in its step. For example, you may need to joggle or shake the tool to achieve activation, it will likely loose RPM and energy during performance, and the tool will usually emit of smell of "malfunction" or burning. You may notice more sparking than is usual for you power tool; by peering through the motor's cooling vents, you can usually keep a consistent eye on any sparking, usual or unusual, that occurs within the motor. Additionally, if the tool stalls or cuts-out during use, it is very likely your brushes have simply worn themselves out.
Although it's a generally fail-safe game-plan to wait for your power tools to show you it's time for a brush replacement, it may not always be the wisest option. As with any other power tool component, it is important to maintain and monitor your brushes. This, of course, is not necessary with every use, but periodically (depending on degree and frequency of use) it is beneficial to take a quick peek at the tool's brushes. As a general rule, if either brush has worn to about a quarter inch long, it is time to replace it. If the carbon (a brush is essentially a carbon block with a metal spring tail) shows any signs of breakage, crumbling, or burning, the brush needs replacing. Additionally, if you find any abnormal coloration such as rainbow patterns on the spring, if there is a broken lead in the spring, or if the spring has collapsed, your brushes should be replaced. It is also important to note that if a worn brush is used for too long inside your tool's motor, they can damage or destroy the armature (the commutator bars on the armature that the brushes make contact with) - needless to say, an armature is a much more expensive and complicated repair than is a few carbon brushes.
Ultimately, with poor performance, zero performance, sparking, or bad smells, your tool will show you when its brushes need replacing; it is, however, always better to be safe than sorry, I'd recommend checking-up on your brushes from time to time to ensure you continually reap superior performance and superior results from your power tools.