• Protects the soil from erosion
• Reduces compaction from the impact of heavy rains
• Conserves moisture, reducing the need for frequent waterings
• Maintains a more even soil temperature
• Prevents weed growth
• Keeps fruits and vegetables clean
• Keeps feet clean, allowing access to garden even when damp
• Provides a "finished" look to the garden

Types:
Organic (shredded bark or wood) and inorganic (decorative rock)

As organic mulches decompose, they add nutrients and organic matter to the soil and beneficial microorganisms like nitrifying bacteria and mycorrhizal fungi are enhanced while undesirable pathogens -- those that cause plant diseases are inhibited.

Shredded hardwood can remove some nitrates. As it decomposes, the nitrates from the soil are soaked up. These nitrates are also the chemicals that feed your plants. Eventually, however, if you leave the chippings there long enough, as they decompose further the nitrates will once again be released making them available to your plants.

Pine straw will hold better on a steep grade (How to Keep Mulch on a Steep Grade | eHow)

How To:

• Pull or cut weeds closely, if you are mulching for weed control. While not strictly necessary, it will help the mulch, and anything under it, to lay flat, and it will slow down the weed growth. Remember, mulch prevents weed growth by excluding light.
• Lay down anything you want under the mulch, such as landscaping fabric or plastic. Try adding several layers of newspaper or cardboard (remove tape and labels first) if you'd like a biodegradable means of blocking weeds.
• You can put a pre-emergence herbicide like Preen on top of the mulch.
  There are herbicides treated mulches like Preen Mulch Plus. Purdue Ag says they work.
  Depending on the brand, some of them are applied over top of the mulch, and some are applied to the soil before the mulch is applied. A pre-emergent herbicide creates a vapor barrier at the soil level that stops weed seed germination, and can be very effective at keeping your gardens weed free. They usually only last about 3 or 4 months and need to be re-applied. Source: FreePlants.com
  Preen says to apply after mulching. That makes sense since most inexpensive mulch is not treated and may have weed seeds.
• Don't dump big piles in one spot; It will compact loose soil.
• Renew organic mulches every few years, as they break down and get spread around.

Thickness:

• Aim for at least 2 to 4 inches (5-10cm) of depth. (wikiHow)
• Apply a mulch layer no more than 1 to 3 inches thick.
  A wood-derived mulch may undergo high temperature decomposition causing it to dry out. The mulch may then be colonized by fungi that create water repellent conditions throughout the mulch. Water is unable to penetrate the mulch and reach the soil and plants fail to receive adequate moisture. Mulching too deeply can also cause the soil to remain continuously wet contributing to root and stem rot problems in addition to depriving plants of needed oxygen. (Fact Sheet | ladybug.uconn.edu)
• NY State Park Biologists have proven that covering stiltgrass with 4-6 inches of mulch (chips, leaf litter) will prevent stiltgrass from emerging."

Around Trees:

• Spread mulch ring at least 3 feet around the tree, preferably all the way out to the drip line (the outer edge of the treeÕs canopy.)
• Keep mulch several inches away from the base of the tree to avoid rot and disease.
• If grass is growing around your tree, put a 5-page layer of newspaper over the grass, get it wet, then add mulch on top.
• Spread mulch in a loose layer 2-4 inches deep to allow water and air to reach the tree roots.
• Don't create a mulch volcano by piling mulch around the base. It will trap moisture and can cause the trunk to rot.

Links:
Weed Management in Landscapes Management Guidelines--UC IPM | UCDavis.edu
Mulching | NRCS
How to Apply Mulch: 9 Steps (with Pictures) - wikiHow
Mulching.pdf | TreeWorkNow.com
Fact Sheet
How to Keep Mulch on a Steep Grade | eHow