It's no magic. It collects data like everything else and if you're serious enough, you might get some insights onto what to improve
Yes, I use for some of my sites. It is like any other heatmap plugin, but with some extra features (eg: you can see how the user interact with the page, through a video format).
Not directly, but it helps a lot to understand what to improve on your page, resulting in a better user experience.
Like any other script (GA, for example), it may impact the site's performance.
I used it for a few days then pulled out. It does what hotjar and similar applications do only that it's free.
I get a lot more information with a site log analysis program.
