Pros: Easy to use, very large capacity
Cons: Inbuilt DAC is good but compromise
Brilliant for sheer storage size but it fills up quickly if you like videos, or have a lot of music at high bitrates or lossless. It's an iPod so the interface is easy.
Sound great for trains and other mobile use, worth pairing up with decent in ears to get some isolation and reduce the sound levels for sustained listening.
For stereo/hifi or in-house use buy a dock or cable that plugs into the bottom. The internal DAC is pretty good but is a compromise that is quite reasonable in such a small device. It gives pretty decent stereo rather than hifi - this becomes more apparent when you've heard an iPod through a digital dock and DAC, like the NS-D1 or the Wadia. For lossless and high bitrate music, this gives very good quality sound from a portable convenient device.
Note the limitation to 48kHz although it seems to play 24 bit files. And it won't play WMA or FLAC as most people know already.