I use a Wacom Tablet. It's an Intuos 4. It's great. It even comes with a mouse which I'm using on the tablet at the moment, but that's just a bonus. As for what you can do with it, it's really up to the user. I use mine to practice digital painting and vector art in Adobe Photoshop and Illustrator. I also draw a lot, and am more of the traditional sort.
Keep in mind that just because one has a Wacom tablet, doesn't mean they have to give up drawing traditionally. A lot of people do both, as a matter of fact I'd say it's more common than choosing just one now and days. Especially if you want to use your skills to get a job. I like drawing traditionally, but those skills have helped me in Photoshop.
As for the pen itself, it's vital. Using the mouse is pretty much out of the question...unless you're doing vector art. But if you're painting in programs like Corel Painter and Photoshop, it's practically impossible to get the dexterity with a mouse that comes with a pen...which you can adjust to your desired pen pressure.
Oh and a lot of people, like me, draw freehand and scan their images in and paint them digitally. Some people choose to just start out in Photoshop. Doesn't really matter. Regardless, you need a pen and a tablet to do the actual painting. Really, what would one do once they scan the artwork in? Paint with the mouse? No, you need a pen.
I have the smallest tablet available and I think it's the best. I don't need to reach across the other side of the tablet just to get to the other side of the screen. And it doesn't take up that much space on my desk. And I think it's cheaper. Some folks like the bigger tablets, but I don't prefer them. It's up to the user.
If you're really serious about art, or think you might want to pursue an art career, you may want to consider purchasing a tablet and experimenting in Photoshop (assuming you have the money). There are a bunch of free tutorials and sites everywhere online that can really help you. I can recommend a couple of good ones if you're interested. You can always return the tablet too if you don't think it's what you want.