IT outsourcing, and software outsourcing in particular, is a most effective way to stretch your budget. If you need to have state-of-the-art IT solutions worked out and innovations implemented with less losses, outsourcing may be the only way out.
Cutting your costs and upgrading the quality of the services you offer will allow you to concentrate on your core activities and expand the competitive capacity of your business.
This is the main reason why an average software development and/or Web development company resorts to outsourcing today.

What kinds of projects are usually outsourced?

In theory, it's possible to outsource almost any kind of project (e.g., application development, database design, Web development, ecommerce solutions, ecommerce Web site design, etc.).
In practice, businesses usually prefer to keep network and database administration in house and to outsource such projects that would allow them to concentrate on their core activities. This is true for outsourcing both to domestic and offshore vendors.
A middle-sized software development company or a Web design company might outsource virtually each project, especially the company has established reliable partnership relations with the vendor.

What return of investment can I expect?

I've read that when managers of a software company plan outsourcing, they usually make it their aim to cut down expenditures by 30% or even more.
Moreover, I believe that if you count not only person hours required to implement the project but also the deployment and in-house personnel training costs, you'll be able to save about 50-60% of your expenses by outsourcing your project overseas.

Is there a surefire way to choose a reliable outsource service provider?

I'm afraid there isn't. However, there are ways to avoid costly blunders. Choosing an OSP that best fits your needs is a hard and responsible job.
A comprehensive Request for Proposal will help you create competition between the potential vendors and, consequently, cut your costs. Contact at least one client of each potential vendor for the information on the quality and promptness of the service rendered.

It's also a good idea to create an image of a perfect vendor, and then pass on to the selection process. Compare the information on your potential outsource service providers against the image that you have created and leave out the ones that don't seem to be your perfect OSP.
Making a final comparison, take into consideration a combination of factors, not just the one that seems to be the most attractive.

Are there any communication problems that I need to know up front?

Even communication with your neighbor can be difficult when you don't focus your attention on it. If you believe that nothing can substitute face-to-face discussions, you might want to look for an offshore OSP that has the head office in the country.
Otherwise, telephone conversations, e-mail, and instant messaging will make it possible to solve almost any issue. Sometimes telephone conversations aren't useful because of the language and psychological barriers, so the best means of communication are e-mail and instant messaging.
Language and/or cultural problems might contribute to all kinds of mix-up, so ask for the resumes of those employees who are going to be responsible for each part/stage of the project to make sure they are fluent in English.