I'm a bit late to the party, but I would like to offer my take on it.
The first first thing that comes to my mind when I think about magic, is not the mechanism, nor the rules, but the possibilities. In effect, I think of the "what" and "why" first, and the "how" second.
Yes, magic is not supposed to be the be all end all instant solution to any problem, and there should be rules and limitations governing its use, but for me it is often enough to know that they exist without spelling them out -- as long as the application is internally consistent. But it is more interesting to me to focus on what the magic can do, and why magic is needed to accomplish it.
I would like to mention that Clarke's third law (which IObviouslyWantSmut mentioned above) is asymmetrical. Some feats of advanced technology may appear as magic to the uninitiated, but some depictions of magical feats cannot be duplicated by technological means, no matter how advanced, because they would violate the fundamental physical laws of the universe. And if the effect one is after falls into that category, there is little alternative to resorting to magic. (As an aside, I would like to add that often what appears to be (fictional) technology is nothing more than thinly disguised magic. Time travel, shrinking rays, and their ilk come to mind).
Personally speaking, some of the things that I like require magic so it features prominently in my RPs.
That said, magic is a dangerous beast which, once introduced, must be kept on a tight leash lest it devours the plot and kills the story. Imagine the following exchange:
- The hero uses his magic wand/talisman/ability/spell/ritual/whatever to erase the villain and all their minions from existence.
- Um, no, the hero cannot do that. It doesn't work like this.
- Why not?
So now, you have to figure out how it does work, or at the least decide what is possible and what isn't, and keep it consistent throughout the story in order to maintain believably. Otherwise you get something like the following exchange:
- The hero can now use his magic wand/talisman/ability/spell/ritual/whatever to erase the villain and all their minions from existence.
- Wait, didn't you say it could not be done before, so how come it can be done now?
- Um, because... reasons?
- That's it, I'm outa here.
Magic is a complicated subject.