A polarising filter is probably the most useful all-rounder after a protective UV filter.
Polarising filters can be used to reduce reflections on glass or water (and other non-metallic surfaces).
Another major application is to increase colour saturation - particularly effective in landscape shots where the blue of the sky can be greatly enhanced (as shown in picture at top of page - top image "before", lower image "after").
The filter itself is set in a rotating mount and you can vary the degree to which the image is affected by turning the front of the filter ring.
It will reduce the amount of light reaching the film by a small amount (up to 2 stops), but a camera with TTL metering will compensate for this automatically.
Please Note: This circular polarising filter is designed for autofocus cameras, camcorders, or manual-focus cameras with spot-metering. If you have a manual focus camera you can get away with using a linear polarising style of filter (although this circular one will work equally well).
If using a lens wider than 28mm watch out for vignetting caused by the deeper-than-usual filter mount.
All in all this is a fantastic addition to the enthusiast photographer's gadget bag, and highly recommended as the first filter to go for when building up an outfit. It is not a "special effect" filter but can be used to subtly enhance natural-looking scenes.
