Your birth plan is basically a 'plan' for your birth experience.  Yes, contrary to what you may think, you can actually have a say in your birth experience.  Your birth plan basically incorporates your preference for every aspect of your birth experience, e.g. whether you prefer to have epidural or other forms of pain relief, whether you want to have your waterbag burst or not, who do you want to be there, etc.
 
My Birth Experience
My birth experience with Dominic was completely beyond my control.  I was scheduled for inducement of labour because Dominic did not arrive on the expected due date.  Because my labour was induced, I had to be strapped down the whole time by the fetal monitor.  I couldn't move around when moving around is actually a better way to speed up labour.  I had countless vaginal examinations done by every Tom, Dick and Harry, which I think is absolutely unnecessary.  Not to mention the feeling of being violated.  1½ days later, I had epidural and was given the 'drip' and had my waterbag burst to further speed up my labour.  As a result of the rupturing of membrane (bursting of waterbag), an internal fetal monitor, which is a spiral-shaped needle, was stuck to Dominic's head (ouch!).  Dominic was finally born about 2½ days after I was first admitted for inducement of labour, with the help of forceps.  Needless to say, as part of the common practice, I had episiotomy.

At that time, I didn't know much about things and basically went along with what the doctor said, assuming that the doctor and the hospital know what is best for me.  Before you start thinking that my doctor must be a terrible one, let me assure you that he is a wonderful doctor and I am very happy with him.  However, I wish I had more knowledge then and participate more by thinking through what I really want.  I probably wouldn't have felt so powerless over the whole situation, like an animal sent to the slaughter.

Why a Birth Plan?

The advantage of having a birth plan is that it gives you a say in the matter and hence, more control than you would normally have without a birth plan.  It forces you to sit down, research and think through in detail what kind of birth experience you really want.  Without a birth plan, you will basically be subject to the 'default settings', or standard practices, of your doctor and hospital, regardless of whether you like it or not.

A birth plan should not be confrontational.  It is a communication tool to help you communicate your preferences with the various parties involved including the doctors and other hospital staff.  You should discuss with your doctor about your preferences before putting everything down in writing.  Your birth plan should not sound like your orders but should just state your preferences under normal circumstances (labour without complications).  You will not know for sure what is going to happen during your labour.  Understand that under certain special circumstances, certain 'un-preferred' procedures need to be done.  Your birth plan will not override medically necessary procedures. So, be flexible.

Having something written down in black and white and filed in your medical file is also helpful in the event that your doctor is not able to perform the delivery and another doctor has to take over.  You won't have to go through your birth plan with the relief doctor while in the midst of labour.