first of all .htaccess is a directory level configuration file (meaning you can have many of those in different directories)
second - it overrides server's global configuration
third - it can only be accessed directly - never via http
Things you can do with .htaccess:
- restrict access to a directory (allow only users with passwords in .htpasswd file)
- instruct how to handle different mime types
- control caching
- control directory listing
- block IP's, domains, referrers
- and even URL rewriting!
see this site for great .htaccess tips corz(dot)org/serv/tricks/htaccess.php
I should also add that overuse of .htaccess can be very messy, makes website hard to control and has performance implications (just so you don't get over excited and start putting .htaccess with url rewrites in every single dir