Etymology of a "pegged CPU"

Many analog gauges such as speedometers have a maximum marking which is technically not as high as you might be able to make the reading actually go. To prevent the indicator needle from going too far beyond that marking and possibly getting bent or otherwise damaged when it hits the casing, a small peg is placed at or slightly beyond the maximum marking. Thus, when you achieve the highest speed the gauge will show, you have "pegged the needle".

(Hitting the peg is not damaging in the way that hitting the casing would be because the peg is placed much closer to the base of the needle than the tip, so there is less torque being exerted, and the torque is usually on a thicker part of the needle.)

Here is an image of a gauge, with the peg circled in green. On this one you don't have to worry about needle damage, since the gauge is circular, but you wouldn't want to have it measuring a pressure of about 100 psi and only showing a reading of about 20 psi because it had wrapped around.

(Unfortunately the only other reference I can find on short notice is Urban Dictionary (sense 6).)

I have seen an actual pegged meter in the EE Lab at the University of Wisconsin. When the meter is hit with a sudden extreme over voltage, the needle hits the peg hard enough that the needle wraps around the peg.

Why is there a peg on the face of the meter? Probably because the meter isn't accurate above the peg point.