Personally, I think I am still in the process of making the final paradigm leap to generics. It will probably be some time yet before I am satisfied that I am applying the concept creatively enough in the early design phase. The end goal is to become comfortable enough with the new syntax to "genericize" my code and make it more type-safe and reusable overall.
Right now, a lot of people are overly-occupied with the latest 3.5 toys. If it ain't SilverLight or MVC it ain't worth talking about. It pays to concern oneself with the basic building blocks that make up the language of your choice. In my case, it is C# although I used C++ right through college and spent some time with Java. The point is that in an object-oriented world, such concepts as generics travel quite well across languages and underpin the development of a strong object view of things overall. The "drag and drop brigade" frequently have a problem grasping this.
Generics operate at the compiler level. It was necessary to change the metadata, compiler and IL instructions to make it all posssible. The upshot is that generics work across different .NET managed languages. This means that we can define a generic class in C# and consume it in VB. Score another one for code reuse :-)
Under the hood, the compiler generates the intermediate language (IL) which contains placeholders for the actual types which will be substituted at runtime. In other words, the generic types are "instantiated" at runtime. This is known as "lazy" specialization or "just-in-time". The accompanying metadata is used for compile-time type-checking and intellisense.
It is possible that code could try to use types which are not compatible with what was
intended and "contraints" are provided as a measure of protection to prevent this happening. Remember, a generic class or method knows nothing about the arguments being passed to it. The compiler needs to know something more. Each type parameter can have a different set of constraints, expressed using a where clause. A parameter can have multiple constraints, separated by commas.
class Guitar < T1, T2, T3>
where T1: Fender
where T2: Gibson
where T3: Martin
To recap, you will most likely find a use for generics with collections. It is well worth the time invested. Right now, I'm working my way through a copy of Professional .NET 2.0 Generics by Tod Golding. It's about the best book on the topic of Generics that I have come across. Happy coding!