Vegas is excellent at effects. It has great realtime playback - it was doing realtime effects out to FireWire long before any other program even thought of it. There are also a variety of quality settings and at the top setting the quality is very good. You get less realtime playback at the top settings, but the quality does rival and even beat some of the other programs.
There are various quality settings and you can preview effects at low, auto, good or best quality, meaning that you can always choose a setting where you see something. Everything is realtime and the list of effects is huge and includes excellent primary and secondary colour correction, good quality motion paths, a nice titler, and wacky effects like old movie, TV simulation, lens flaresand glows.
One area that Vegas is slightly different to other programs is 3D motion. Vegas actually has excellent 3D motion paths and can do more in 3D than most programs. You can move clips around in true 3D - so they can fly around each other, sometimes in front, sometimes behind, and create really stunning effects. The only downside is that 3D can only be applied on a track level - so that on a long project with various sections in 3D you would end up with lots of tracks!
Vegas can apply keyframable mattes to clips, with edge feathering. This kind of feature has slowly made its way into every editing program, so is now in Avid and EDIUS (although not in Premiere Pro) and used to be the kind of effect you would need to go to a program like After Effects or Boris to achieve.
You can use these masks for isolating an area of the screen, for example a person moving, and keying it onto another background.
This list of useful effects is huge and all are thoroughly keyframable. It even has media generators which can create moving background textures - very handy for the background of a DVD menu, for example.
Vegas also has keyframable slow motion, again previewable in realtime, and when rendered, due to Vegas subsampling, very smooth.
When it comes to effects Vegas sometimes feels a bit like After Effects with a bit of editing thrown in, rather than an editing program with effects. You can also nest effects by putting one project inside another and you can have several version of Vegas running with different timeline open when editing.
Another interesting feature is that you can use other machines on your network to render effects with Vegas, if you purchase additional licences.