This is very interesting question! :-) I am using Google alerts since its creation! Here are some useful tricks which may help you understand the whole process better:
First go to: http://www.google.com/alerts
and set up your campaign:
Search query: Here put your keyword (you can create unlimited alerts)
Result type: I am choosing "Everything", you may consider to narrow down the results
How often: I choose "As it happens"
How many: I am using "Only the best results"
Deliver to: you have 2 options here - to your Feed or to your e-mail - I prefer the e-mail option! :-)
Alright - now the types of alerts! I will discuss 3 types of Google Alerts I am personally using:
1. Alerts about my site. I want to know what people are thinking about my site so I am using:
2. To get traffic - niche and topic related! I am using Google alerts to find relevant blog posts on certain topics. After I receive the notification in my inbox - I can reply and guide the readers to my site! Simply use Google Alerts and fill in the forms your desired keywords! If you have a lot of keywords you may need a lot of time to answer all the questions! :-)
3. Security alerts. I am using this method to track any eventual security problem which may occur. This is good to prevent any security holes! I would suggest to use professional plugins, programs and web master tool to track any potential risks! You can input this line:
site:yoursite.com acne OR botox OR casino OR dating OR debt OR insurance OR mortgage OR paxil OR pharmacy OR phentamine OR pherimones OR poker OR porn OR OR roulette sex OR viagara OR viagra OR xxx
Overall - it is a nice way for getting a quality and most importantly - targeted traffic! :-)