They can restrict how you use the money. Check your plan for details. You can take it as a lump sum distribution and pay taxes on it. Or you can roll it over into a regular IRA account and defer the taxes. Getting your money out of a regular IRA is a little harder.
All withdrawals are taxable.
Having that money accumulating tax free is too big a benefit to pass up. If you're older or fighting tax problems and want the deduction a traditional IRA would fit the bill. One final thought for Russ. Every dollar that he saves in his 20's is the equivalent of four dollars saved in his 50's. So it's much easier to accumulate enough for a comfortable retirement if he starts early.