Sony Vegas comes in three flavors: Movie Studio (usually abbreviated as VMS among its users), Movie Studio Platinum (VMSP), and Pro. In simple terms, Movie Studio can only use DV-sized video, Platinum can deal with AVCHD/HDV-sized one (not full HD), and Pro can go full HD. Other differences include the amount of A/V tracks allowed in the timeline, available plugins, editing picture quality (8bit vs 32bit), .NET/VB scripting, and the various exporting options. Prices range from $80 to $600 for the three products. As of this writing, the latest versions are 8.0c for the two consumer versions and 8.0a for the Pro version.
A Vegas window consists of the timeline, the extra tools organized in a tab window format, the audio mixer, and the preview window. The first thing that a user must get right on Vegas is the project properties, which must reflect the source footage's properties. Vegas supports a variety of mpeg, h.264 and intermediate formats and it can also read codecs installed system-wide on Windows (I tried the popular open source intermediate codecs Huffyuv and Lagarith). It couldn't read our XViD/DivX files, but apparently it can export as such as long as an encoder is installed. Vegas supports a variety of audio formats too, including AAC, mp3, WAVE, OGG and the Pro version supports FLAC too. Vegas Movie Studio is perhaps the only NLE in the consumer market that supports 24p properly. Reports for such support for Premiere Elements have been conflicting, while the rest of the consumer video editing applications like Ulead, Magix, iMovie and Movie Maker don't support 24p at all (which is important if you are an owner of a recent Canon HD consumer camera).
The preview window allows you to playback and view the currently selected clip, selected track or the whole project. Vegas has support for secondary monitors that can go full screen, but the preview window itself doesn't (that would be a nice feature to have). One of the sticky point on Vegas is HD playback speed. While our iMovie '05 can playback 1080i footage real-time on a dual 1.2 Ghz G4 PPC, the same can't be said about Vegas on a 3 Ghz hyperthreaded P4. I usually get about 27 frames out of 30 when playing back HDV on the preview window (using "preview" quality), which is good enough for editing. When using the "Best" preview quality, frame rate drops down to 10fps. Editing .mp4 and .mov files (some digi-videocams shoot as such) are not ideal either in terms of editing speed. Vegas uses DirectX-9 hardware for basic acceleration, but no special hooks are used like other pro NLEs do with OpenGL.
On the plus side, Vegas uses fewer resources than some of its main competitors. For example, we found Premiere much slower than Vegas: slower to load and slower to operate. Premiere also used from the get-go about 1.2 GBs of RAM and about 1.6 GBs when some HDV footage was loaded, while Vegas was happy with 512 MBs of RAM on load, and up to 1 to 1.4 GBs when some HDV footage was placed in the timeline. When using plain DV footage, the RAM requirements were much smaller, below 1 GB.
The heart of the editing process, the timeline, is a bit difficult to get into at first, but it becomes second nature after a while. I have written a crash course on Vegas here if you are interested in learning the basics in 5 minutes time. Vegas supports plugins, transitions, markers and regions, it has great trimming tools, it allows you to mix different kinds of footage in one track (including pictures), it supports panning & cropping and motion tracking. You can have up to 4 audio and 4 video tracks on the consumer versions of Vegas and unlimited on Pro. Slow motion and timelapse is easy to do, moving the footage left and right frame by frame is easy to do too, while compositing and the masking tool are also a breeze.
I believe that the best feature of Vegas is its color plugins. Where some other NLEs don't even offer basic color correction tools, Vegas comes with at least 30-40 powerful ones. Coupling these with the powerful freeware Aav6cc plugin and the commercial "Magic Bullet for Editors 2.0", you can achieve amazingly professional results in seconds. I've written a guide to Vegas color grading and color correcting here. Another great editing feature is A/V "envelopes". With these you can apply different properties to the same A/V clip without having to split your footage. For example, if you want a smooth transition from high volume to low volume and back up, you use these. And speaking about audio, a number of mixing consoles and audio plugins are coming with Vegas by default too.
Regarding exporting, Vegas Pro can export to h.264 and WMV, mpeg1-2 regarding delivery formats, and cineform, uncompressed and a number of other formats for intermediate usage. The retail versions come with the companion "DVD Architect" application that will let you author good looking DVDs. However, if you are not too much into menus and fancy images, you can burn a VCD directly from Vegas, or a multimedia CD (mpeg2 files written raw on a DVD -- for those players that support these), while Vegas Pro is also able to burn the Blu-Ray filesystem in plain DVD media (holds up to 45 minutes of 1080p footage).
Now, regarding the negative points, I'd say that the biggest two problems with Vegas are:
a. The restrictive exporting dialogs in the consumer versions of Vegas. You can have a cumbersome UI, you can crash all you want if you must, but under no circumstances limit the exporting options from your users, because this is what they ultimately want to be successful with. The non-ability to export in DivX by default and mpeg-4 for cellphones, and the version of h.264 only used via some pre-cooked templates, is limiting the consumer products in my opinion. Which is why I had to write (a now pretty popular) tutorial on how to go around this limitation and export in various popular formats using FFmpeg. The obvious reason for the exports being limited on the cheaper Vegas versions, is possibly the encoder licenses fees, but still...
b. Not enough third party plugins/filters. The industry support is just not there. Even Red Giant Software who released their new version of 'Magic Bullet Suite 2007' recently for 3 NLEs, but they left Vegas out. The word is that they will work on a Vegas version in 2008, but still, this was pretty shocking for many Vegas users. It is my opinion that Vegas should either license or work towards a compatibility layer with After Effects' plugin system which will allow them to use hundreds of existing Adobe plugins. This is of course no easy task -- if not close to impossible architecture-wise.
In conclusion, Vegas has become the choice of the "geeks". The new kids on the video block if you like. Exactly because both its consumer versions and its Pro version have the best ratio in price/features, this is a major selling point for the new wave of the rebel videographers out there. I don't expect all the Avid, FCP and Adobe professionals to flock into Vegas overnight, but I do expect all the new professionals and amateurs to do so.