Lens hoods play a very important role, especially in outdoor photography. Despite it's importance, it's still one of the most overlooked items by the average photographer. A lens hoods primary function is to prevent unwanted light from hitting the lens. Without the protection of a lens hood, unwanted side light will hit the lens, reducing contrast, and possibly create nasty lens flare. Lens flare can destroy an otherwise fine photograph.
The lens hoods also serve a second function, that being one of protection. With a lens hood installed you’re less likely to accidentally touch the optics. If you’re photographing small children or animals at close range this will also help you from getting unwanted smudges on the lens, because we all know how much kids and animals love shiny things.
Now for the downside. Lens hoods are expensive! Each lens has a specific matching lens hood. How expensive you ask? The average cost of a lens hood is generally around $30. That's some very expensive plastic!
All in all, lens hoods are a vital tool, and worth the investment.