Crating is a controversial topic. There are those who believe that crate training is indefensible and others who believe that it is a panacea. The reality is likely somewhere in between.
Where is the crate? It should be around other people. Ideally, set it up in the bedroom near you. Have the dog sleep in it at night. Dogs are social and like to be around their people. Don't force it into the crate. Feed your dog in the crate.
Wire cages are not as appealing to dogs that like the safe, enclosed nature of a crate, but they have better ventilation for use in warm places. You might, for example, have a plastic crate in your house and a wire one for the car. Since many models fold up, they are also often easier to transport and store.
The crate should be large enough for the dog to lie down, stand up and turn around in comfortably, but not large enough for the dog to relieve itself at one end and sleep at the other. You may buy a crate sized for an adult dog and block off part of it with a chew-proof obstacle until the dog grows into it, or you may buy a succession of crates as the dog grows.
If you use a crate in your car, consider something like the Crate Mate, which is a heavy pouch that attaches permanently to a plastic crate. It has a clear window for information about the dog, including owners name/address/etc./vet info/medication info/etc. All this is in red thirty point type. There's also room for 3-4 days supply of food, medication, etc., leashes, collars, even a water bottle. They're in bright colors so they can't be missed. Order from Custom Dog Supplies (see Resources) or make your own.
If a crate is properly introduced to a dog (or puppy) the dog will grow to think of the crate as its den and safe haven. Most dogs that are crated will use the open crate as a resting place.
The major use of a crate is to prevent the dog from doing something wrong and not getting corrected for it. It is useless to correct a dog for something that it has already done; the dog must be "caught in the act". If the dog is out of its crate while unsupervised, it may do something wrong and not be corrected, or worse yet, corrected after the fact. If the dog is not corrected, the dog may develop the problem behavior as a habit (dogs are creatures of habit), or learn that the it can get away with the behavior when not immediately supervised. A dog that rarely gets away with anything will not learn that if nobody is around it can get away with bad behaviors.
If the dog is corrected after the fact, it will not associate the correction with the behavior, and will begin to think that corrections are arbitrary, and that the owner is not to be trusted. This results in a poor relationship and a dog that does not associate corrections, which are believed arbitrary, with bad behaviors even when they are applied in time. This cannot be overemphasized: a dog's lack of trust in its owner's corrections is one of the major sources of problems between dogs and their owners.
A secondary advantage of a crate is that it minimizes damage done by a dog (especially a young one) to the house, furniture, footwear etc. This reduces costs and aggravation and makes it easier for the dog and master to get along. It also protects the dog from harm by its destruction: ingestion of splinters or toy parts, shock from chewing through wires, etc.
A young dog should be placed in its crate whenever it cannot be supervised.
If a dog is trained in puppyhood with a crate, it will not always require crating. Puppies or untrained dogs require extensive crating. After a year or so of crate training, many dogs will know what to do and what not to, and will have good habits. At this time crating might only be used when the dog needs to be out of the way, or when traveling.
With housetraining, it is only a matter of time for the pup to outgrow the need for a crate. As as puppy gets older, it will naturally develop ways of telling you that it needs to go (but probably not before about 4-6 months, be patient), especially if you encourage this. As this starts to develop, you can decrease the crate usage. Always keep a close eye on your pup -- the trouble you take now will pay big dividends later. If you need to, put a leash on your pup and attach it to your waist. That keeps the pup from wandering off into trouble. By the time your puppy is about 6-8 months, he should be able to sleep through the night either in an open crate or a dog bed.
Many breeds, especially the larger and more active ones, will need to be crated during their adolescence until they can be trusted in the home, if you cannot leave them outside in the yard while you are gone. There are several things you need to keep in mind. The first is that this type of crating is never to be a permanent arrangement except for those rare cases where the dog proves completely unreliable. While this does happen, it's more common for the dog to be sufficiently mature by the time they are two or so to be left alone in the house.
To make the transition between keeping your dog in the crate and leaving him out when you are at work, start preparing your dog on weekends. Leave him in your house for an hour and then come back. Maybe it needs to be fifteen minutes. Whatever. Find the time that works, and make a habit of leaving him unsupervised in the house for that long. Be sure to praise him when you come back. (Leave the crate open -- available but open -- while you are gone.) When you know the dog is reliable for this period of time, gradually add 15-30 minute increments to the dog's "safe time." Don't be surprised if this takes months or even a year.
Now, there are some dogs that are never reliable when left inside. This might include dogs that were rescued, dogs that have separation anxiety, dogs that destroy things indiscriminately, or who mark or otherwise eliminate in the house.
They are extremely useful. But they are not the only means to achieve housetraining or safety in the house or car. They are, in the opinion of many, one of the best and easiest ways of doing so, with many side benefits.