I've read some about .egg files and I've noticed them in my lib directory but what are the advantages/disadvantages of using then as a developer?
Eggs are a pretty good way to distribute python apps.  Think of it as a platform independent .deb file that will install all dependencies and whatnot.  The advantage is that it's easy to use for the end user.  The disadvantage are that it can be cumbersome to package your app up as a .egg file.
You should also offer an alternative means of installation in addition to .eggs.  There are some people who don't like using eggs because they don't like the idea of a software program installing whatever software it wants.  These usually tend to be sysadmin types.
What are the advantages of packaging your python library/application as an .egg file?