Medically, caffeine is useful as a cardiac stimulant and also as a mild diuretic (it increases urine production). Recreationally, it is used to provide a "boost of energy" or a feeling of heightened alertness. It's often used to stay awake longer -- college students and drivers use it to stay awake late into the night. Many people feel as though they "cannot function" in the morning without a cup of coffee to provide caffeine and the boost it gives them.
Caffeine is an addictive drug. Among its many actions, it operates using the same mechanisms that amphetamines, cocaine, and heroin use to stimulate the brain. On a spectrum, caffeine's effects are more mild than amphetamines, cocaine and heroin, but it is manipulating the same channels, and that is one of the things that gives caffeine its addictive qualities. If you feel like you cannot function without it and must consume it every day, then you are addicted to caffeine.
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