For me, it was a celebration, a ritual if you will, to send out cards. We did it for our oldest and then had a huge party here at the house. The cards were not that much, but if I was crafty I think hand made cards would be beautiful. We'll do the same for Sean who is graduating *gasp* this year.
I sent cards only to close family/friends...come to think of it, everyone who was invited to the party.
I don't think there are any hard and fast "rules" about it. The only thing I don't like is getting a graduation announcement, sending a present/money, and NOT getting a thank you note.