I find myself constantly using Audacity for the same chores, and chances are, if you are making a podcast, you will too. First, I use it to record audio from a microphone or from some other source, like a tape deck or turntable. Then, if I recorded vocals, I edit the mistakes out, remove unwanted noise and pops between phrases, and create a composite of the best takes.
Sometimes I apply a few simple audio effects, like a compressor, to even out any peaks in the sound. The effects seem adequate, but they are only average to me. The biggest weak point here is that effects can only be applied destructively, which means you permanently change the audio when you effect it. You can not go back latter and turn a compressor off or tweek an EQ again the way you can in more advanced packages.
I can use Audacity to bring music beds in, create intros, and use sound effects, and then convert my finished project to MP3 format. Sometimes, I also import audio files that are giving me trouble, and view their waveforms to see if there are any visual clues as to what the problem might be.
The Tech Specs
Audacity can record and edit 16-bit, 24-bit, and 32-bit (floating point) samples, and up to 96 KHz. sample rate. What this means is that although some of it's tools are simplistic, Audacity's audio quality is no slouch; it performs up to professional standards.
There are unlimited Undo (and Redo), and the only limit to the number of tracks you can edit and mix are the limits of your computer's processor and RAM. The program comes with several installed effects, including one that can help remove static, hiss, hum, or other constant background noises. You can also load and use VST plug-ins with the add-on VST Enabler, which gives you access to the very big world world of free VST plug-ins online (although these will still be applied destructively).
What Audacity is Not
Audacity is not made for complex music production. I wouldn't use Audacity for using loops or multi-tracking if I had a choice. One big reason why is because the different tracks in the work pane are not truly synced together. Each time you overdub a previous track with another recording, the track you record will be slightly out of time and behind the preexisting track.
This is not really a big deal for most podcasting jobs, where you can slide elements around, and it's not that important to have them perfectly in sync. However, for multi-track music, this is a big problem. Audacity's manual suggests making a sharp percussive sound (like the clack from a director's board) on the first track, and hitting that sound again in time on the succeeding recordings, and then lining everything up visually. If you you hit the sync sound late on your take, you're out of luck. This is pretty privative, so I hope an enterprising, open source code guru tackles this problem in the next release.
Bottom Line Time
Although it is not the end-all be-all of audio editors, Audacity has a simple tool set that works well, and many people decide to stay with it because it works for them. For those ready to take a step up to a more powerful audio editor, Adobe's Audition offers tremendous power and flexibility, which has earned it the top spot among radio stations everywhere.
But many podcasters don't need Audition's firepower. For them, Audacity fills a niche for quality, free software from a trustworthy source, and I'm sure it enables many people to start podcasting who otherwise wouldn't or couldn't. And that's definitely a good thing.