I've never personally bought or sold on there, but someone I know used to sell a lot of things on there. Mostly handmade stuffed animals. The "hook" for the site is that everything (as far as I remember) is handmade, and you can find a lot of specific niches depending on what you want to buy or sell. It's like a lot of places. It's a community. You have to make friends, and build up credibility. From what I know about it, one of their major points is to list hand made items to get a decent asking price for the people who make them. Not to just make the cheapest garbage possible, and drive out all the competition. It's a lot more relationship oriented than merely capitalistic. Anyone can go to Walmart and buy a stuffed animal, or cheap jewelery. But if you buy from people on Etsy, you may pay more, but you're supporting individuals who make more "artistic," or specialized items. People often do "commission" pieces for people who are asking for something specific. So, like many things it's all about the niche.
If you have stuff that is home mage then it's a great place to sell. A lot of people make good money selling their products on there.
The draw about Etsy is that you can get custom designed handmade stuff from people who choose to accept custom orders, like custom handmade toys or custom stuff like that. Walmart is like stock photos. Etsy is like hiring your own photographer to do the shooting.