I use it primarily in the cold water periods when fish are more stationary and relating to the bottom of the lake. Aside from a flot/bobber, it's one of the best methods of depth control I know of. You can literally jig it in place and make a fish strike or worry the heck out of him until he moves away. I've used it on Winter-time White Perch, Stripers and Walleye with good results. I have been using #4 & #2 drop-shot/mosquito hooks but bought a bunch of Stand Out brand hooks made specifically for drop shotting, anxious to try them out this Fall. Remember that most all fish feed up so tie your hook accordingly. Considering there's line above and below the hook with this vertical arrangement hook set can sometimes be more of a problem. If the line is tight when the fish strikes, the dropper line prevents the fish from taking the bait very deep. The dropper itself almost serves as a vertical fence against the fish's face/lips. One thing for sure, I've never gut-hooked a fish while using a drop shot rig.
Article at In Fisherman: http://www.in-fisherman.com/walleye_insider/articles/wi0407_DropShot/index.html