There are a variety of types of lenses with VR/IS capabilities. Many of the older, first generation versions have limited stabilization capabilities, and no way to restrict stabilization to a single plane of motion.

Modern lenses with VR/IS capabilities tend to be much more advanced. They usually offer anywhere from two to a whopping four stops of hand-holdability in average circumstances. Newer lenses also tend to include a mode switch that allows you to disable stabilization in the horizontal plane, allowing you to pan the camera to capture sports or wildlife motion without stabilization interfering, while still stabilizing in the vertical plane.

Vibration reduction can be a considerable bonus with telephoto lenses when you can't afford a wide aperture. A 300mm or longer f/2.8 lens can cost a considerable amount of money, anywhere from $2000 up to several thousand for something in the range of 500mm or greater. For contrast, a Canon EF 300mm f/4 lens with Image Stabilization costs about $1200, while the Canon EF 300mm f/2.8 lens (which also has IS) costs $4500. Similarly, the Nikon 300mm f/2.8 lens (with VR) costs about $5,900. Sadly, I don't believe Nikon has any non f/2.8 telephoto lenses with VR, all of their VR lenses seem to already be fast f/2.8 lenses (or f/4 once you pass 400mm, which is still a very wide aperture for 500-600mm lenses.)

Another interesting comparison can be made with telephoto zoom lenses. A comparable example would be Canon's 70-200mm lens line, of which there are four current models. Two f/4's and two f/2.8's. The prices break out as follows:

       | No IS |  IS
=======================
 f/4.0 | $626  | $1200
 f/2.8 | $1200 | $2300

The 70-200/4 IS costs about the same as the 70-200/2.8 w/o IS. The f/4 IS version brings to the table a whopping 3-4 stops of additional hand-holdability, which technically makes it a better low-light lens than the f/2.8 w/o IS...by nearly two stops. With good technique, you should be able to get shots with the f/4 IS lens that you could get with an f/1.4-f/1.8 Non-IS lens, which is pretty amazing. (A good hand-held technique would be required to get the full 4-stop benefit of this particular lenses IS, but with practice, I've heard many people state that they can easily get 4 stops lower shutter speed.) I believe Nikon has very similar offerings in the 70-200mm range with VR.

Vibration Reduction/Image Stabilization can be problematic in some cases. Again, modern stabilization systems are a lot more advanced, and these problems are either non-existent, or very minor. Older lenses may have some issues when making large movements, or when mounted on a tripod. A common problem with stabilization is when it is used with a tripod-mounted lens and a cable release. It generally does not kick in until the shutter is at least partially depressed. When shooting hand-held, you should press the shutter button part way to enable stabilization, frame your shot, and fully depress the shutter button when you are ready to capture the shot. In this case, since VR/IS is already active, it doesn't change your framing when you fully depress the shutter button. With a tripod and cable release, you tend to fully depress the shutter button once everything is framed and ready to go. Stabilization will kick in at the last moment, and will usually change your framing or introduce vibration or funky blurring due to its untimely activation. In these cases, it is best to disable stabilization. Modern lenses often have tripod-sensing stabilization, which will automatically disable it when it senses that it is mounted on a tripod (which is done by matching the patterns of vibration, which differ significantly when hand-held.) Even with tripod-sensing stabilization, some circumstances, such as wind, can hamper any automatic features. Generally speaking, it is best to disable stabilization when you use a tripod.