Changes 'read more' quicktags into toggles so users can see extra content without leaving the page.
It's only for pages so shouldn't be used if you rely on 'read more' links to link to the full post when you're outputting excerpts, say on a homepage list of recent posts.
You'll need to add this line to your page template as well:
<?php global $more; $more = FALSE; ?>
See http://codex.wordpress.org/Customizing_the_Read_More#How_to_use_Read_More_in_Pages for where and why.
Yes, if you modify the_content function in your templates e.g.
<?php the_content('<p class="serif">Read the rest of this page »</p>'); ?>