CEDEGA sucks badly, indeed. The transgaming guys also got bad reps from the WINE community, as they were believed to take from the WINE project without giving back. There is also Crossover Office and Crossover Games from the Codeweavers folks, who are doing a pretty decent job.
However, how badly the *real* WINE does suck or not, depends on what you are trying to run with it. Those things (games only) I want to run, run flawlessly. Lucky me
, I guess. We also use WINE for some business software at my company, which (now) also runs without any trouble. Although as soon as you involve .Net, SQL Server, or MS' Internet information Server, WINE is worth nothing. On the other hand, WINE does not promise anything like that to run at all. And it will never be able to replace fully Windows. But at least it rendered *my* Windows useless.
If you're too lazy to bug around with any WINE settings there are also open source projects like Play On Linux or Work On Linux both providing a "framework" to set up WINE correctly for whatever application.
As for the compatibility layer, yes, that's more appropriate. WINE does not "emulate" anything (hardware and stuff), it only provides all the Windows APIs to make windows programs happy. And yes, it makes a difference, at least technically, and we're in a tech forum here.
Also, a thread explaining WINE would be pointless, there is more than enough information over at www.winehq.org