What are the advantages and disadvantages of using a pen name?
A pen name has one purpose: to hide or screen your identity from your reader.
There are several legitimate reasons to do that, the most common one is when an established author wants to write in a new genre. I talk about that here.
Some authors just have an issue with using their real name--either they are afraid no one will like their book and they don't want to be embarassed later, or they are afraid they'll be the next J.K. Rowling and want to protect their privacy. Sometimes the subject matter of the book is such that they need to protect their identity (for example, if it's a memoir about something that's socially unacceptable, or where you could get sued if people knew you wrote the book). Or maybe they don't like their real name. Or maybe the publisher doesn't like their real name. Whatever.
The disadvantage is that your friends, neighbors, old boyfriends, the teacher who said you'd never write worth anything, will never know it's you when your book ends up on the NYT Best Seller list.
It might also create some issues if you're out there promoting your book and people recognize you, but usually only if you're already well known. For example, if Hilary (she's a first-name celebrity now, right?) used a pen name to write about politics. That could be a problem.
A similar problem is that some readers will feel cheated if they find out you're not using your real name. This is more of an issue with non-fiction where you're presenting yourself as an expert in the area you're writing about. They wonder if they can trust what you're saying.
If you want to use a pen name, talk to your agent/publisher about it. Discuss the pros and cons with them and then make a decision. Personally, I don't think it's a big deal either way, but I do like to see authors use their real names when possible because I think if they've gone to all the trouble to write a good book, they deserve all the credit and perks that come with that.