I'd love to find a Generation 3 or 4, but I don't have a huge budget so Generation 1 or Generation 2 will probably do just fine. I'm looking for a 1X to 4X magnification scope that will mount on a Picatinny Rail, and cost under $1,000. Maybe military surplus?

Check Sportsman Guide online

Down around $350 to $500 new for Gen1

here are a couple of neat new toys also but they are up around $2000
One is sort of a video camera that mounts on a rail and allows you to shoot around corners and also converts your regular scope to NV

http://www.sportsmansguide.com/net/cb/cb.aspx?a=453943

http://www.sportsmansguide.com/net/cb/cb.aspx?a=453967

What are some ways i can use it to it's full potential? What can i view at night that i can't view during the day???

You can do Paris Hilton

better clarity compared to what? first gen night vision needs an external light-source such as an infrared light. also, there is an extreme distortion on what you actually see. you will probably be disappointed...