1) Unencrypted wifi typically means an "open" connection such as what is used in Mcdonalds and many locations. When Wifi is open, typically, it is possible for everyone to see what everyone else does. When you login to websites, the website remembers you typically by saving a cookie on your machine.
So, capturing the session cookie basically means stealing the cookie and putting it in to an active session elsewhere to trick the server in to thinking that you are the person who logged in.
2) Ins and outs? :S - well, I think I covered it in the first part - Unsecure wifi is convenient, but by its nature, it is unsecure.
You say filter out answers about use VPN, but that is honestly the solution - an encrypted tunnel to a trusted network. Many wifi hotspots fully support VPN clients and even give you configuation files for free (example - BT Openzone VPN client for the UK).
WPA2 based networks do a better job at isolating connections from each other, but it still has it's problems and is hackable by someone who knows what they are doing.
The only truly (IMHO) secure option is certificate based wifi networks, but other than in large enterprises with the infrastructure to support it, you just don't see it every day.