This topic comes up quite a bit. People want to know if you can use FS for real pilot training. The answer is yes...and no. While you can't legally log time towards endorsements or ratings you can use it as a personal training tool to maintain proficiency. In the latter capacity it performs just as well (and has similar drawbacks) as any commecial, PC-based simulation package. Specifically, it works great for procedures, navigation and instrument practice. It is not optimized for visual, 'seat of your pants' flying because of the limitations of the platform. It is very useful, however, for gaining situational awareness in a visual environment. For example, you can use it to familiarize yourself with a new airport and the surrounding area before flying there in real life. I've used it many times myself for this.
Another potential downside applies to pilots who fly a particular aircraft frequently: they want to fly their airplane. We only ship a limited number in the box but the active third-party community can help by supplying either freeware or payware add-on aircraft. Bob Jacobs just published a very useful opinion piece on FlightSim.com that addresses this very issue. Check it out.