it's case-by case, and also sport-by-sport. each sport is governed by their own organization that decides which technical advantages are fair and which aren't.

and it's interesting that you mention better bicycles being okay, because for the most part they aren't. UCI rules state "no technical innovation regarding anything used, worn or carried by any rider or license holder during a competition (bicycles, equipment mounted on them, accessories, helmets, clothing, means of communication, etc.) may be used until approved by the UCI executive bureau."

the full ruleset for what constitutes a race-legal bicycle is here: http://www.uci.ch/mm/Document/News/Rulesandregulation/16/51/...