Determining whether to use the multisite feature depends on user access and posting. Each site in the network, although sharing the same codebase and users, is still a self-contained unit. Users still have to access the back end of each site to manage options or post to that site. A limited amount of general options is network-wide, and posting is not one of them.
You can use multiple sites in a network to give the appearance that only one site exists. Put the same theme on each site, and the visitor doesn't realize that they are separate. This is a good way to separate sections of a magazine site, using editors for complete sections (sites) but not letting them access other parts of the network or the back end of other sites.
Usually, for multiple users to post to one site, WordPress is sufficient. The multiuser part of the WordPress MU name did not refer to how many users, really. MU was always a bit of a misnomer and an inaccurate depiction of what the software actually did. A network of sites is a much closer description.
Another factor to consider is how comfortable you are with editing files directly on the server. Setting up the network involves access to the server directly, and ongoing maintenance and support for your users can often lead to the network owner doing the necessary maintenance, which is not for the faint of heart. Generally, you should use a network of sites in the following cases:
Because all files are shared, some aspects have been locked down for security purposes. One of the most puzzling for new users is the suppression of errors. Most PHP errors (say you installed a faulty plugin or incorrectly edited a file) do not output messages to the screen. Instead, what appears is what we like to call the White Screen of Death.
Knowing how to find and use error logs and do general debugging are skills needed when you are managing your own network. Even if your Web host will set up the ongoing daily or weekly tasks for you, managing a network can be a steep learning curve.
When you enable the network, the existing WordPress site becomes the main site in the installation.
Although WordPress can be quite powerful, in the following situations the management of multiple sites has its limitations:
WordPress MU had quirks in the software. The www was stripped from the domain name, for example, and you couldn't install on just an IP address or by using only localhost as the name. These issues are addressed in WordPress 3.0.