The pen tool is one of the best features of Photoshop, You can use it for many things including, Vector art, Cropping stuff out of pictures, Swirls and twirls.....All up your imagination :)
It is like the polygon lasso tool...but better! Why? because now you scan scroll around the canvas while working with the pen tool :) Sweet!
Click somewhere on the canvas then click some where else on the screen, then hold the mouse button and drag around...You can create a curve which will not be bumpy like the 'selection tool' :)
If you HOLD the Alt key and move the achorpoint (which are those little 'squares') you can create a straight line after making a curve :). If you click somehwere else, you will create a new curve from the straight line!
One cool features is the Freefom Pen-Tool because you can use it for loads of drawing purposes like for instance vectorising people :). The problem is that to use it properly and efficiently you should get a tablet...Its gonna be very hard with a mouse unless you're a pro with it :D