I do almost all my flying using frequent flyer miles. Being based in the U.S. I am members of United, American and Delta. Normally, I would accrue miles on only one airline but ended up with three because:
United - this is my main airline with a hub near where I live; and also a member of the Star Alliance which gives me more seat availabily on partner airlines. I mostly accrue miles with them using my United Business Visa credit card to charge most of my living expenses, and paying the balance in full each month so as not to be charged interest. (Note: Having a business card also allows me to provide each of my "employee" children with a card where I can set their credit limits which they cannot exceed, and thereby can't incur fees, and I get a monthly statement with all their charges...great for controlling the spending by kids in college!)
Delta - I ended up flying to Uganda and earned 18,000 miles for flying. I didn't want those miles to go to waste by not having 25,000 miles required for a flight, so I got their credit card which gave me enough free miles just for getting the card to almost reach 50,000 miles. So I used their credit card to reach 50,000. Their points never expire so are sitting there waiting for me to use. Also a member of an airline partnership.
American - Another case where I earned 40,000 miles just to get their American Express card that I mostly use for purchases at Costco, which only takes American Express. Also a member of an airline partnership.
The good thing about United and American is that you can pay for one way using half the required number of miles, which really helps when you only want to go one way.
I recently used 35,000 miles on United to fly my wife and I to Honolulu, where we will take a cruise to Sydney (for which I can earn 20,000 miles if I book through United Cruises), and then I used 70,000 for both of us to fly back to the U.S. from Auckland, New Zealand on Air New Zealand for a total of 85,000 miles (taking into account the 20,000 miles for booking), instead of paying 140,000 round trip. Also, I recently used American to send my son to Bangkok on Japan Airlines for 35,000 miles. It's not that I don't want to bring him back, although that would be a side benefit, but I don't know when or how he wants to come back. He may want to fly Air Asia to Europe, and then I only have to use 25,000 miles to bring him back to the U.S. from there.
As for acheiving certain levels, such as Gold or Burgundy, with United I was Platinum, and was able to board first and often sit in seats up front with more leg room and not have to pay for a checked bag, but I would never use my miles for any upgrades...all miles are used for the next trip in economy.
I only use frequent flyer miles when I get at least $.02/mile value; i.e., if a ticket costs more than $500 for 25,000 miles or $1000 for 50,000 miles. If the flight is less than $500 then I pay for it and earn the miles. My best deals are on international flights. When I flew round trip to China and Thailand in 2009 I used 70,000, with China as the free stopover. Had I paid for the flight it would have been $3.700, so each mile was worth over $.05/mile.
As for being able to use miles, I plan trips well in advance. I book my seats 330 days in advance when the seats open, and even before 330 days where I then change the reservation as the actual date I want to fly opens up.