Serrated knives vs. traditional blades
How does a traditional knife work? The very thin edge applies a very high amount of pressure over the contact area with what you are cutting, splitting it. The thinner and straighter the blade, the less damage you do to what you are cutting, providing a clean, uniform cut. In contrast, how does a serrated knife work? A serrated knife is basically a saw. If you're cutting a piece of wood, a saw works by using teeth to rip into the wood and then tear out chunks of wood, making a channel to allow the saw to continue moving through the wood. On a more micro scale, this is exactly what a serrated knife does. It tears and saws at whatever you are cutting. For things like carrots, celery, etc, you don't notice because you probably only make one or two strokes through the food. You will notice a bigger difference when cutting something like a roast. You will have to make multiple strokes, and you will see some noticeably jagged cuts, and probably some "meat sawdust". Yummy.
So which is better? A sharp, traditional edged knife will yield a cleaner cut, and be easier to use. However it will require honing to keep its edge sharp, and will occasionally (once every 6 or 12 months, depending on your use) need to be sharpened. Sharpening is a whole 'nother article, but suffice to say -- avoid that can opener sharpening. . .thing. . .and have your knives professionally sharpened. Serrated knives don't really require sharpening because they're not knives. They're saws. So they are certainly lower maintenance, and in many situations, are useful. The problem is most serrated knives are of extremely low quality. If you see it advertised at 4am on an infomercial where you get 40 knives for $20, but wait there's more; you're not buying quality.
Things you (okay I) don't want to cut with a serrated knife: meat in general; raw or cooked. Herbs, lettuce, and other leafy things. But what about bread you say? Bread knives are serrated, you say! Sort of. More precisely, bread knives (and usually steak knives) are scalloped. Why do you want to use a scalloped knife for bread? A loaf of bread generally has very, very hard and thin crust filled with a very light and fluffy interior. It does not have the structural rigidity to support the pressure needed to cut by a traditional knife. Thus you use a scalloped or serrated knife to saw at the bread with very little downward pressure, keeping the bread intact. There's not much in the middle to mangle; it's mostly air, you're really jast sawing through the crust. And you'll notice a lot of sawdust (bread crumbs).
So why are steak knives serrated or scalloped? For completely different reasons. Steak or dinner knives, to be used at the table, are deliberately not very sharp, and are often serrated. The reasons are numerous. First, you're not interested in a clean cut for presentation. You're interested in getting a bite-sized piece of scrumptious food in your slavering maw. Secondly, you're not cutting on a proper surface -- you're cutting on a plate, which is probably glazed ceramic, and very hard. This will quickly dull a sharp knife, and eventually ruin the plate with cut marks. A scalloped blade will be used like a saw on what you're cutting, and put relatively little pressure on the plate.
Hopefully this information is of some use. If you're interested in what knives I feel are most useful, check out this article.