Bitcoin is both a really great idea, and a really stupid idea.
sage_joch has already pointed out the reasons why it's a really cool idea.
It's also flawed in a number of ways. First, the limited supply means that you've essentially just created an electronic version of gold. It's more easily tradeable, but its behavior as a commodity will be similar.
If you like investing in gold, that's great. I guess.
Second, bitcoins do not necessarily remove the issue of paying a fee for transactions. Instead of paying a fee per transaction, you will instead pay a fee in order to transform normal currency into bitcoins (this is not as readily apparent now, but if the system ever becomes large enough to actually have stable value, then you will need to pay someone to convert real currency to bitcoins). Will this be cheaper than credit-card fees? Probably? Keep in mind that credit card companies are offering just that: credit, which is a service. Someone has to pay for it (either you, the merchant, or the marketers who they sell your buying profile to).
Third, bitcoins ignore the fact that national currencies are an incredibly valuable tool for modern governments. They can of course be misused (see: Argentina, post-WWI Germany), but adjusting the value of your currency is one of few ways of improving your country's competitiveness globally (see: the trouble Ireland, Greece, and other European nations have had recently because they do not have control over the Euro). So, don't expect national currencies to go away, or become obsolete.
Perhaps the Bitcoin community has an answer for these concerns...
In response to your second point, if there is a good BitCoin economy, a business might be able to earn BitCoins, and spend some of those BitCoins on costs to buy services from other BitCoin acceptors, and maybe even issue dividends in BitCoins. Shareholders could use those BitCoins to buy things directly.
These transactions require computational resources to get them into the block chain, so probably would cost money, but with low barriers of entry, they would tend towards the computational cost of getting a block into the chain.
However, unlike with a credit card, there is no requirement that amounts get converted back into a government-backed currency after every transaction.
1). Ah, if that's the goal then...great I guess. I personally don't think moving back to a commodity currency is a good idea, but that is perhaps another discussion.
2). I've heard a number of Bitcoin enthusiasts state this as an advantage/goal (even in this discussion), who perhaps have started developing their own ideas about what bc should be used for.
3). But an alternative to what purpose? Say that I believe strongly enough in the ideals of BC that I want to use it (privacy, accountability, etc). Do I convert part of my monthly paycheck into BCs? Do I convert all of it? This isn't terribly practical if my national currency is still popular. Perhaps I want to even-up with friends or acquaintances? Is transferring BCs easier than writing a check?
Now imagine that I don't believe strongly in the idealistic angles of BC (which, sadly, will be the vast majority of your potential users). I want immediate pay-offs for my efforts (this may sound petty, but isn't. Most peoples' time is extremely valuable to them - if you have a product, even a free one, you must compete for their time). What benefit to I gain from converting my money to BCs?
sage_joch has already pointed out the reasons why it's a really cool idea.
It's also flawed in a number of ways. First, the limited supply means that you've essentially just created an electronic version of gold. It's more easily tradeable, but its behavior as a commodity will be similar.
If you like investing in gold, that's great. I guess.
Second, bitcoins do not necessarily remove the issue of paying a fee for transactions. Instead of paying a fee per transaction, you will instead pay a fee in order to transform normal currency into bitcoins (this is not as readily apparent now, but if the system ever becomes large enough to actually have stable value, then you will need to pay someone to convert real currency to bitcoins). Will this be cheaper than credit-card fees? Probably? Keep in mind that credit card companies are offering just that: credit, which is a service. Someone has to pay for it (either you, the merchant, or the marketers who they sell your buying profile to).
Third, bitcoins ignore the fact that national currencies are an incredibly valuable tool for modern governments. They can of course be misused (see: Argentina, post-WWI Germany), but adjusting the value of your currency is one of few ways of improving your country's competitiveness globally (see: the trouble Ireland, Greece, and other European nations have had recently because they do not have control over the Euro). So, don't expect national currencies to go away, or become obsolete.
Perhaps the Bitcoin community has an answer for these concerns...