I've completed German levels 1-5 of Rosetta Stone, and these are my experiences:
First, a brief description of how Rosetta Stone is laid out. There is a basic application you install, and then you install language levels on top of it. You can purchase several boxes with different levels for the same language or even different languages, but you would only install the application the first time, and the additional language levels plug into it. The maximum number of levels per language is five, but many languages only have one through three available. This means that Rosetta Stone will not cover as advanced of topics in these languages.
Each level of a language has four units, and each unit has four main lessons and about 35 activities overall. The main lessons each take 20-30 minutes to complete, and the additional activities each take 5-10 minutes. The additional activities correspond to a specific lesson and focus on a single aspect of the language, like pronunciation, vocabulary, or writing. Additionally, there is a review for each lesson, which is occasionally repeated as you complete the level. Unfortunately, these reviews do not carry across levels. You will never see a review for Level 1, Unit 2, Lesson 3 while working on Level 2, for instance. These reviews are based on time, not how many activities you've completed, so if you take longer to complete the level, you will see more reviews.
The course is built around hearing native speakers speak a phrase that corresponds to a picture. Then there are different tasks you have to accomplish. Sometimes you hear and/or see a phrase and select a picture, sometimes you select a phrase that matches a picture, sometimes you repeat or type the phrase, and sometimes you are given a phrase and a picture, then you have to modify the phrase to match another picture. You will never have a textual grammar explanation to read and you will never hear or see any language besides the one you are studying. This is why Rosetta Stone can sell the same software all over the world. There is a free demo on their website, which is some or all of the first lesson, which will give you an idea how it works. Don't worry if it seems too easy, though, at first. It will get more difficult. It does a pretty good job of building on itself, so that by the end of Level 5, it kept giving me sentences to repeat that were so long that even if they were English, I would have found it challenging to remember every single exact word I had to say.
So, how well does Rosetta Stone work? I found it to be very effective at teaching me vocabulary so that I would retain it (there is lots of forced repetition). I remember the words and phrases I learned from Rosetta Stone much better than the ones I encountered elsewhere. I also found it helpful that Rosetta Stone forces you to speak the language somewhat accurately, although the speech recognition can be unbearably frustrating if you don't have a good microphone, since it will then reject your input for seemingly no reason. Of course, speech recognition is far from a mature technology right now, so even once you have a decent microphone, it's quirky. There will be words it will count as correct when you've said entirely the wrong word, and there will be words it will give you hell over if you pronounce them just not quite right. (Entschuldigen always gave me trouble because my 'ul' was too American and not German enough.) I still think it's better than having no feedback on your pronunciation, as I believe is the case with most other self-study courses.
What it's not good at is teaching you any sort of grammar. It does have perfunctory grammar activities, but they are not sufficient. Perhaps for some languages they are okay, but German grammar in particular is too complicated for the limited space Rosetta Stone gives it. Trying to teach it solely by example would require many more examples than Rosetta Stone offers you. It does not even cover all the ways that the German "the" words change based on gender and part of speech. It will give you one or two examples, but with three genders, one or two is not enough! Strangely, it is much better at teaching grammar in Levels 4 and 5, but in Level 4, it starts off with the most basic grammar there is. The sort of stuff that, if you hadn't figured it out by mid-Level 1, you would probably have given up in frustration and never gotten to Level 4.
Therefore, I cannot recommend Rosetta Stone as your sole language-learning tool. However, I do think that in combination with an instructional grammar book with exercises in it, it can be an effective tool. (I used and recommend German Demystified by Edward Swick as well as the workbooks by Edward Swick and Astrid Henschel if you want extra practice--her German Verb Tenses was the best workbook I've used as it also briefly covers other parts of speech instead of assuming you know everything already.) But this lack of grammar really hampers it. Rosetta Stone always says that they are trying to teach you language the way that children learn it, but children do eventually go to school to be explicitly taught grammar, so unless you want to perpetually sound like a five-year-old speaking your new language, you'll have to get outside grammar help.
How much do you learn from Rosetta Stone? It makes some claims about level 5 preparing you to live in the country where the language is spoken. Ahahahaha. I think level 5, and the grammar books I used alongside it, got me to a solidly intermediate level of German. I'm advanced enough that my main weakness is lack of vocabulary and failure to understand very complicated sentences (which German is fond of), but I am very far from actually being able to understand German in the wild. I will admit that Rosetta Stone went as far as any other instructional resource I've found, but the fact remains that there's a huge gulf between being introduced to the main grammatical concepts and a small core vocabulary and being really proficient with the language. I have not, however, had any luck finding any resources at all to help me now that I've outgrown the introductory ones. Anyone know of any listening/speaking/vocabulary courses aimed toward intermediate to advanced students? I suppose at this point, lots of interaction with native speakers is my best bet, but I've got a long way to go before I feel comfortable saying I speak German.
As for the additional things added in v.4 of Rosetta Stone. I had v.3 of the German course, but I have v.4 in another language, and I have to say, the additions are really poor. Everything added requires an online subscription, which is, at cheapest, $99 a year. After paying $400 for the software, that is really insult after injury! I have not tried the lessons with native speakers, and I think that part could be worth the money and also justify an online subscription, especially if you live in a rural area where you don't have any other resources like this. But why are the games, which kind of suck anyway, part of the online subscription? And as for the iOS app, I was really hoping for a flashcards/matching type of app to play on airplanes and so forth. But, first of all, the app requires an internet connection and a paid online subscription, so you're not going to be using it on a plane at all. And second of all, the app seems to be focused on listening and repeating activities. Let me tell you, when I'm waiting around in a public place somewhere, I definitely want to start parroting badly pronounced foreign languages into my iPod. Yeah, that's not awkward at all. The one good side is that you can still use the core software without a subscription (make sure not to check "Open in Browser"), although I won't be surprised if v.5 of Rosetta Stone is online-only.
Lastly, a note about the headset included with the application. It sucks. It sounds terrible, fits super-awkwardly, and the microphone isn't even any good, which makes it hard to use the headset to do, you know, the speech recognition in Rosetta Stone. Analog microphones are also not recommended by Rosetta Stone, and I can confirm they don't work any better than the provided microphone (or at least, cheap ones don't). So, if you buy this software, expect to go out and also spend $20 on a USB gaming headset. Having a decent microphone makes a huge difference in your experience using the speech recognition part of the software.