Werewolves aren't new to the Elder Scrolls universe, but they return in Skyrim for the first time since their arrival in the second Morrowind expansion, Bloodmoon. Unlike Skyrim's vampire disease, contracting lycanthropy is not as simple as doing battle with one of these fearsome creatures. Partially because you won't randomly encounter them out in the wilderness and partially because that's just not how things work.
Werewolves factor into one of Skyrim's faction questlines, so heed this important caveat before you read our Skyrim Werewolf guide any further: SPOILERS AHEAD.
From Man To Man-Beast
Becoming a werewolf is a required component of the Companions questline, the Companions being the Skyrim equivalent of the Fighters Guild. After you complete your first few tasks for this bunch, you'll learn their shocking secret: they're werewolves, the lot of them. And you've impressed them enough to be invited to take part in a blood ritual that will trigger your own transformation.
There is but one way to rid yourself of lycanthropy once it's sunk its teeth in, and it's a permanent solution that is presented to you at the end of the Companions questline. The task involves beheading a witch and, ultimately, defeating the wolf spirit that has possessed you.
You might want to think twice about that cure though. The drawbacks of being a werewolf in Skyrim are fairly minimal in comparison to the great power the disease gives you.
Let The Dogs Out
The central power you'll depend on as a Skyrim werewolf is Beast Form, which becomes available after you've transformed for the first time during the Companions quest The Silver Hand. At the most basic level, Beast Form lets you transform into a werewolf once per day for 2.5 minutes (in real time). That time can be extended by "activating" a corpse (press A on your 360 controller while standing near and targeting it); you'll then feed, which restores 50 points of health and adds 30 seconds to your remaining wolf time.
There are plenty of good reasons to embrace your Beast Form. Your max health and stamina are both boosted by 100 points apiece. You can sprint faster than any horse can gallop. Crimes committed as a werewolf won't count against you (though don't let anyone see you transform). Best of all, when you're in your beast form, any wolves you meet will treat you as an ally.
There are some downsides you'll need to consider as well. Corpses can't be looted and items can't be collected when you're doing your werewolf thing. Similarly, you won't be able to equip anything -- weapons, equipment, spells, Shouts, powers, etc. -- and access to your inventory screen is cut off. You're also physically larger, which means some of the tighter portals and entryways will be inaccessible.
There's also the whole transformation issue. If someone spots you in the act of changing, you'll suddenly find yourself slapped with a 1,000 gold bounty. Prepare to be attacked in general, too; anyone who sees you in your beast form will either run away in fear or move to claim your head as a trophy.
Tooth And Nail Fighting
Beast Form is the central werewolf ability, but there are a lot of layers to how it actually all works. As a werewolf, in either normal or beast form, you're immune to disease. Vampires who participate in the blood ritual will be immediately cured of that illness. Conversely, you'll no longer receive any bonus for sleeping in an owned bed, owing to your wolf side's Restless Blood.
Beast Form also brings out a few other abilities. In addition to running faster, you'll also be able to jump higher/further. Your melee damage gets a significant boost as well, which is fortunate since you'll only be able to wield your claws in wolf form. The damage you do improves as you advance to higher levels, all the way to +60 melee damage for character levels 45 and up.
Beast Form also lets you use Howls, which are essentially the werewolf equivalent of a Shout. You'll start out with access to just one Howl, which causes fear in foes level 25 and lower for 30 seconds. There's a Companions side quest which leads you to additional Howls, so you'll eventually be able to do things like Detect Life for 60 seconds or summon wolves to fight beside you.
Making The Most Of Your Inner Beast
If you've opted to stick with your werewolf powers and take the bad along with the good, then there's one last act you'll want to perform. There's a Daedric quest that you can pick up in the southern town of Falkreath involving a convicted murderer who turns out to be a werewolf.
I won't spoil the particulars, but there will come a point at which you'll be forced to either side with the werewolf or slay it. Choose the former and you'll finish the quest with a powerful magical ring that allows you to use a Beast Form transformation twice per day instead of just once. If you want to make werewolfery a thing for your Skyrim character, this quest should be considered essential.
(Screenshots from The Elder Scrolls Wiki)