UML provides a way of visualizing object oriented designs (from a number of aspects, both static and dynamic).
It can be applied at all stages of a project (and tools such as IBM's
Rational Rose are the industry standard). In such a tool, you can design using UML, add code fragments to the UML and generate a complete system.
Whether such tools are a beneficial way to organize a project depends on the size of the project and how formal it is.
What I can say is that UML's main strengths are in the design and documentation parts of a project. The use-case sets can clarify requirements, and a few class and object diagrams are worth thousands of words of documentation. Even if you do not use a UML tool, it is worthwhile to have a way of drawing UML diagrams.
For smaller projects (say less than a dozen developers), the comprehensive tools have some drawbacks: the project becomes very dependent on the tool (both the training of programmers and the format of the project files); and it requires micro-design of every part of the project (graphical design can be slower than writing a text file). A UML tool is perhaps also more suitable for projects where the requirements can be substantially worked out at the beginning.
If you just use UML for design, then it is sufficient to use a general purpose diagramming package such as Dia, or Inkscape. The beauty of using something like Inkscape is that the SVG diagrams can be easily embedded into the documentation.
My rule of thumb is to use UML diagrams to design/document the parts of the project that are complex (eg use case diagrams for the primary requirements, overall package and class diagrams, object diagrams for any complex data structures, and interaction diagrams for any tricky dynamic sequences), rather than force the entire project into a particular form of design (let alone code generation).
A more significant project decision (than choosing a UML tool) is the software development methodology to be followed, whether the traditional waterfall model, or a more iterative model.
