You should read these:

http://asktom.oracle.com/Misc/tuning-with-sqltracetrue.html
http://asktom.oracle.com/Misc/sqltracetrue-part-two.html

Basically if you have skewed data and executed a query like:

select * from t where column = ?

and we did not peek, we would use "default guesses" to estimate the cardinality. This often led to a full scan, and developers would throw the /*+ index */ hint in there and say "stupid cbo, have to hint it".

The reason they hinted - because at the point in the application where they did that query - they used inputs that were highly selective. Only we didn't know that. So, enter bind peeking - now we'd use the index.

But - sometimes, someone would hard parse the query with non-selective inputs, and then the 'bad stuff' happens. The wrong plan gets in place. And - if you don't know about bind peeking - it gets very difficult to diagnose this.

In 11g - they've added "intelligent cursor sharing" and bind peeking.
http://docs.oracle.com/cd/B28359_01/server.111/b28279/chapter1.htm#FEATURENO07493

In the next issue of Oracle Magazine, I'll cover this in more detail (this new feature)