LinkedIn is a social network that focuses on connection, as opposed to subject, activities, friends, etc. Connection in this sense does not really refer to you connecting to old friends or coworkers. It's really about connecting through your friend and coworkers to their friends and coworkers and so on. Think six degrees of seperation.

What can it be used for
You might be able to jump in with a singular purpose and achieve it, but as with many things, if you invest time and energy without yourself in mind you will likely gain more in the end.
That being said, LinkedIn is useful for finding jobs, vendors, workers, and customers. You can also use it to better connect with people you've lost touch with or haven't ever been all that close to from school, work, etc., but beyond finding these long last pals LinkedIn won't do much to keep the conversation going.

What can you do with your profile for extra impact
Update regularly. When you do your contacts are notified, which helps them remember who you are. Having a part of your Summary listing books you're reading, what you've recently blogged on, last seen movie, whatever will remind people to regularly think of you. When your profile is full and descriptive it will be more interesting to people who see it.

Unless you have good reason to do otherwise, make your profile visible and let people know when you've looked at their profiles. Then start looking. When people see that you've looked at theirs, they'll look at yours. They'll try to figure out why you looked at theirs by thinking of how you could possibly work together. They may even agree with what you didn't even have to say and contact you.

Is there a point to paying for what you get for free
Really the question is what do you get for your money. If you pay you get to see a larger number of the people who have looked at your profile. More importantly, you get to use InMail, where you can contact people directly without going through the connection system. Normally if you want to contact someone, you have to say why you want to contact them, and if you're not a first degree connection, each connection has to approve your request and pass yours along. Finally, if your request gets there, it's more of a request for permission to contact someone. If someone wrote you a letter asking you if they could try to sell you something, would you reply? With InMail you email anyone on the system without knowing their email address. If you have the need, it definitely works.

Building a reputation in the system
Get to be a trusted source and facilitator of deals and people will turn to you as the go to guy. When people want to contact your people, allow it or advise nicely why it won't work. Ask actual questions in the Questions section (not leading sales questions) and provide good answers. Great answers are chosen by the questioner as best answers and you're shown as having provided great answers.

Giving and getting recommendations works really well, too. Write recomendations for everyone you possibly can, and they'll likely do so in return. Be honest, you are vouching for someone now, and you'll pay for it with your reputation if you casually recommend someone who ends up being a jerk.

Groups
Under Groups and Associations in your profile you can list any groups, associations or organizations you like. Then when someone searches for that your name will show up as a result. If you're interested in being found by people, this will help. There are also Groups that you request to join. You can request a group introduction to fellow members you're not connected to via InMail without paying for it. Also, the group manager can get a list of names and email addresses of the group's members, so you might get email from the group.

Can you export/import contacts?
You can certainly import your contacts from a number of places and invite people to connect to you and join LinkedIn if they're not already on. It's also possible to not invite those who aren't part of LinkedIn so you're not bombarding your friends and vague acquantinces with requests to sign up for yet another site.

As for exporting your contacts from LinkedIn, you can, but you're only getting name and email address. People typically export their contacts and upload them all to Plaxo so they can get full contact info, and other social networks to strengthen ties and as backup in case LinkedIn decides to stop playing nice. This means you'll likely gets invitations for all sorts of other social networks. Whether this is something good or bad, you'll have to decide.

Who should you connect with
Opinions on who you should or shouldn't connect to are varied and very strongly held. Some people think you should only connect to those you actually know and can vouch for. Others are open to people they've had some contact with. Others to people they'd like to network with. Still others are shooting for bulk and are constantly requesting their allocation of invitations (which is pretty big) be increased. Which philosophy should you adopt? It really boils down to where in the world you'd place LinkedIn if it were in the 'real world' as opposed to online. What would LinkedIn be in the real world? Is it your personal address book, which your close, trusted contacts? Would it be the list of contacts, friends and colleagues you have in your rolodex who you might contact once a year via Christmas card? Maybe it includes all your new coworkers, members of large organizations you're part of and vendors, clients and others you've had casual contact with. Finally, maybe it's everyone you'd like to be able to reach out to at some time, and you'd like to know the world, be your own personal PR agent and be able to pick up the phone and call anyone.

I'd recommend preaching your viewpoint as the best, backed by quotes from FAQs or professors. Just run with what works for you. If you connect to too few people it may not be useful to you. Too many and people you actually do know can get buried in the list. Some people avoid mega connectors. If you are a mega connector you may be contacted regularly to help someone talk to someone else.

How can you actively use the connections you have
Contact people you're connected to get to know them better, to see how you can help eachother, and to ask for leads, business or help. See who they're connected to and ask for intros. See who they've worked for and get inside info before going on a sales call or interview.

Can you actually make money or get jobs off of LinkedIn?
Yes. I have. Here are some of the things I've done:

I wanted desperately to work for a really cool software company. I found a job listing. On LinkedIn I found someone who worked at the company in that position somewhere else in the country and told him I wanted the same job, if he could give me pointers, and introduce me to the hiring manager. He did all these things, and if I had gotten hired he would have gotten a referal bonus, too. I was woefully unqualified by agressively sought after for interviews where I repeatedly proved this. More important than not getting the job, I got interviews I never should have gotten from networking through LinkedIn.

I had recently moved from NYC to Dallas. My employment had vaporized pretty much as I was leaving NYC, and I had decided to start my own company. I needed to hedge my bets, though, so I saw an opening with a major agency in Dallas. I saw on LinkedIn that a former coworker had been very highly placed in the NY office of the same company. He had already given me a glowing recommendation, which I passed along, listing him as a former high level employee of the same agency. And instead of going through HR I found the General Manager of the agency on LinkedIn and contacted him through InMail. He set up a meeting and I found their need for the services of my fledgling company were greater than their need for the position I had inquired about and I got months of full time contracting work.

A connection and I chatted to see how we could help each other out. We tried on a couple of things, but nothing worked out. Later, an old college friend asked him if he knew someone with my expertise. He recommended me and I was able to pitch and win a project.

Almost 2 years ago I started playing with Drupal, the open source content management system. It provided 90% of the functionality I was typically asked to provide, was done in PHP, a language I knew, was very modular, and was regularly updated by it's large community. A lot was easy to do, but occasionally something that I knew would eventually be easy to do took me 2 days instead of 15 minutes, so I decided to find someone who I could pay $50 to explain things to me when I was stumbling, and who might also help out on development projects I'd get. I searched and contacted through LinkedIn, had some discussions, and ended up working for a major Drupal shop for 6 months helping them on the business and management side. That gave me connections, experience and knowledge that were integral to me being able to offer Drupal development services through my company now.

Potential clients have found me through LinkedIn. Others who found me through other means have checked me out on LinkedIn and saw my experience, recommendations and some of the well thought answers I've given to questions.