Web analytics is a cornerstone in not only measuring the success of your site, but in generating future revenue through your site. Gauging the amount of traffic entering and exiting your site and understanding the current trends on your site is something no marketer can afford to ignore.
One of our larger hosting clients is currently running a viral marketing campaign. After analysing their stats we found that of the visitors attracted to the competition, more visitors were leaving the web site than entering the competition. A quick change to the copy and these figures started improving... Without a good analytical tool, this could not have been achieved.
Some more info on the types of analytics tools:
The first generation of web analytics technology is based on log-file analysis. Log-files are a histor of all interactions with the website. These applications analyse the log-files to produce the web statistics. The main difference between applications competing in this arena is the actual report. The raw data is very similar.
Whichever solution you choose for your site, be sure to spend enough time getting to know your visitors...