JohnW :
Whoever taught us that it should bounce hairs off our arms, really just made us favor edges with burrs.
While, burred edges can shave well, not all edges that shave well are burred. As for the usefullness of shaving sharpness, shaving hair is just light precision cutting, a blade that can't shave cleanly can't do a lot of other light push cutting well either, and will in general be out cut by a blade that can shave well at the same grit finish. How much performance is gained is dependent on how much of the performance is influenced by sharpness, so the difference will be greatest the lighter the cutting task.
That being said, burred edges are probably the most common problem in sharpening, especially in the production arena as almost every time I handle a NIB production knife that isn't sharp, all you have to do is give it a light honing to remove the burr and it is near optimal. This is just a case of being sloppy in the sharpening. An edge is formed with a belt and a couple of rough passes are taken with a buffer to clean the edge, if this isn't done right it will leave a burr or round the edge over.
To see the structure of burrs check out Lee's book on sharpening where he shows magnified pictures of sharpened edges at various grit finishes as well as various stages of polish. You can see exactly what a burr is, how it is formed and how to remove it. Once this has been done the cutting performance is still very high, and yes the blade will shave. You can do more reading on this if you browse the wood working groups for information on the "Scary Sharp" method of sharpening. This is basically using sandpaper on glass, in a large number of grits. Again care is taken here to remove the burr, and the edge that results will shave very well.
As for fibreglass insulation, I worked with that lovely material for a few summers quite a few years back and it will dull blades very rapidly. However you do see a lot of edge roll as the material is so hard, on those snap off blades all that it requires to get them back to full sharpness again is a ceramic rod. It is faster to sharpen them with a couple of strokes than to replace the blade.
-Cliff