Switches WordPress feeds to default to Atom format and obsoletes the RDF and RSS 0.92 feeds.
Both RSS and Atom are syndication formats, and both work equally well, really. Atom was developed mainly because RSS is not perfectly clear in several respects.
In the initial days of RSS usage, the format was not well defined. In fact, it's still pretty badly defined. The only reason it works is because, as time has passed, actual usage of the format has led to a sort of de-facto "standard" for what the contents of the various pieces in it should be.
Atom, on the other hand, is very well defined and thought out. So much so that it's an IETF standard, with major support behind it from Google. Google likes Atom. It's easier to parse and use, it's easier to create, it supports publishing now (The Atom Publishing Protocol is supported in WordPress as well). All of Google's feeds default to Atom formats.
Everything Atom does RSS can do too. Atom, however, defined how to do it the right ways in the first place. RSS has been continually playing catch up as Atom developed further and RSS stagnated. The only reason we still have RSS around is simply because of its widespread adoption in the first place. RSS was in the right place at the right time.
No, probably not. Google likes Atom, but they're realistic and read RSS feeds too. That said, a proper Atom feed might not have as many odd problems pop up from time to time.
There isn't one. You activate the plugin and you're done. It's working just by being active. There is no step 2.
Not entirely. :)