Google Recommended that application developers make applications with a target of 16m heap for platforms.
Benchmarking shows that 12m runs the fastest, however some apps will have stability issues and crash. 32m runs faster than 16m, but not as fast as 12m. It however doesnt have the stability issues.
Some people say a very high heap will slow the phone down, other people will say that it will speed it up. See what you like/works with the apps you use.
32 is what is is defaulted at iirc