How are side effects handled in semantics? In Anthony Aaby's "Introduction to Programming Languages" section on Semantics, he makes the following observation:


  Much of the work in the semantics of
  programming languages is motivated by
  the problems encountered in trying to
  construct and understand imperative
  programs---programs with assignment
  commands. Since the assignment command
  reassigns values to variables, the
  assignment can have unexpected effects
  in distant portions of the program.


This strikes me as a remarkable admission, that allowing side effects would motivate a major part of the work in semantics.  

How does the existence of side effects in a programming language impact the ability to map a program to a computational model?  Are there approaches to managing state that can improve this process while still allowing side effects?
Building on Charles's answer, the main difficulty in the theory of programming languages is that the natural notion of equivalence of programs is typically not strict equality either in the most straightforward mathematical semantics you can give, or in the underlying machine model. For example, consider the following bit of Java-like code: 

Object x = new Object();
Object y = new Object();
... some more code ...


So this program creates an object and names it x, and then creates a second object named y, and then continues executing some more code. Now, suppose that a programmer decides to flip the order of allocation of these two objects:

Object y = new Object();
Object x = new Object();
... some more code ...


Now, ask the question: does this refactoring change the behavior of the program? On the one hand, on the underlying machine, x and y will be allocated at different locations in the two runs of the program. So in this sense, the program behaves differently.

But in a Java-like language, you can only test references for equality, and not for order, so this is a difference that the "some more code" cannot observe.  As a result, most programmers will expect that reversing the order will make no difference to the final answer, and most compiler writers expect to be able to perform reorderings and optimizations on this basis. (On the other hand, in a C-like language, you can compare pointers for ordering, by casting them to integers first, and so this reordering does not necessarily preserve observable behavior.) 

One of the central questions of semantics is to answer the question of when two programs are observably equivalent. Since our notion of observation depends on the features of the programming language, we end up with a definition like "two programs are equivalent when no client program can compute different answers based on receiving those programs as inputs." The quantification over all client programs is what makes this question difficult -- it seems like you end up having to say something about all possible client programs to say something about two particular pieces of code.

The trick with denotational semantics is to give a mathematical interpretation that lets you avoid this universal quantification -- you say that the meaning of a piece of code is some mathematical value, and you compare them by checking to see if they're mathematically equal or not. This is local (ie, compositional), and does not involve quantification over all possible clients. (You do need to show that the denotational semantics implies contextual equivalence for it to be sound, of course. When it is complete -- when denotational equality is exactly the same as contextual equivalence, we say the semantics is "fully abstract".)

But means that you need to ensure that the denotational semantics validates those equivalences. So for this example, if you wanted to give a denotational semantics for this Java-like language, you need to ensure not just that calling new takes a heap and gives you back a new heap with the newly-created object, but that the meaning of the program is invariant same under all permutations of the input heap. This can involve quite complex mathematical structures (eg, in this case working in a category which ensures everything works modulo a suitable permutation group).