So just to clear some stuff up, and get some real info in this thread, I'll jump in.
First of all, creatine is naturally found in the body, and it is used as an energy source by cells. Most often by muscle cells.
Creatine (as a supplement) is most often used by people looking to gain muscle mass. Even a diet high in protein won't provide the same amount of creatine that supplements provide.
Creatine works by providing more energy to the cells, allowing to the work harder for longer periods of time. Basically, it will allow you to perform a couple more reps, compared to not taking creatine, which will cause more muscle growth. Fast twitch muscle is much more affected by creatine, compared to slow twitch muscle. Which is why creatine is more useful for something such as body building and powerlifting, and not something like long distance running.
Loosing muscle mass by stopping creatine intake (while still lifting weights) is nothing but rumor. Creatine does not work like steroids. Also, water retention was long thought to be a side effect of use, but some recent studies (that I don't remember where I read) have shown that water weight is so minimal that it can't be considered a side effect.
There's some more info, but I'll let you look it up yourself. If you really considering taking it as a supplement, it might do you some good to do some Google research on your own. The Mayo clinic and University of Maryland both have some good info on their websites. Here's a quick FAQ that is a good place to start reading.
http://www.bodybuilding.com/fun/animalpak22.htm 
