The IP masquerade facility comes with its own set of side effects, some of which are useful and some of which might become bothersome.
None of the hosts on the supported network behind the masquerade router are ever directly seen; consequently, you need only one valid and routable IP address to allow all hosts to make network connections out onto the Internet. This has a downside: none of those hosts are visible from the Internet and you can't directly connect to them from the Internet; the only host visible on a masqueraded network is the masquerade host itself. This is important when you consider services such as mail or FTP. It helps determine what services should be provided by the masquerade host and what services it should proxy or otherwise treat specially.
However, you can use DNAT (Destination NAT) on the router to route inbound connections to certain ports to internal servers. This works great for web and mail servers. You can run those services on hosts on the private network, and use DNAT to forward inbound connections to port 80 and port 25 to the appropriate internal servers. This way, the router host is only involved in routing, not in providing any externally visible services. You can use the same technique to route incoming connections to a high-numbered port (say, 4022) to the Secure Shell (SSH) port (usually 22) on an internal host so you can SSH directly into one of your internal hosts through the router.
Because none of the masqueraded hosts are visible, they are relatively protected from attacks from outside. You can have one host serve as your firewall and masquerading router. Your whole network will be only as safe as your masquerade host, so you should use firewall rules to protect it and you should not run any other externally visible services on it.
IP masquerade will have some impact on the performance of your networking. In typical configurations this will probably be barely measurable. If you have large numbers of active masquerade sessions, though, you may find that the processing required at the masquerade host begins to impact your network throughput. IP masquerade must do a good deal of work for each packet compared to the process of conventional routing. That low-end host you have been planning on using as a masquerade host supporting a personal link to the Internet might be fine, but don't expect too much if you decide you want to use it as a router in your corporate network at Ethernet speeds.
Finally, some network services just won't work through masquerade, or at least not without a lot of help. Typically, these are services that rely on incoming sessions to work, such as some types of Direct Communications Channels (DCC), features in IRC, or certain types of video and audio multicasting services. Some of these services have specially developed "helper" kernel modules to provide solutions for these, and we'll talk about those in a moment. For others, it is possible that you will find no support, so be awareit won't be suitable in all situations.