The main military value of aircraft during WWI was reconnaissance. Aircraft did possess limited ability to bomb and strafe targets on the ground, but this was of limited value, except psychologically, where it could panic troops who were unprepared. The WWII technology of radio was not yet effective enough to allow close coordination with attacking forces essential to effective air support. In the naval sphere, although WWI saw a few ships sunk by aircraft, they were not yet a major threat to warships due to limited range and bomb size.

However, the reconnaissance provided by aircraft was very important in the war. Aircraft could report enemy troop and artillery concentrations preventing surprise attacks. Aircraft could report the positions of friendly troops and the success of their attacks allowing for effective follow up. By sea, Aircraft could report the location of enemy warships, or supply vessels and act as a force multiplier for naval units. In an era before radar, the sea was a vast expanse in which an enemy could easily hide, and aircraft made that much less true, at least in daylight hours.

Because of aircraft's value as reconnaissance units, the skies became worth controlling. Fighter squadrons were created during the war, and the first aces became military celebrities. A constant race developed to improve aviation technology and attain air superiority. This drove rapid technological advance in aviation during the war. For the first time, a navy or army that was deficient in aircraft was at a measurable military disadvantage.

All of the previous posts don't really give any information as to why early WW1 aircraft were limited to a reconnaissance role, and some of the posts herein are inaccurate or flat out wrong. /u/Snugglerific briefly mentions the synchronization gear (also referred to the interrupter gear) which allowed pilots to shoot through propellers without hitting them, but forward firing machine guns were in use before this. Also, u/white_light-king's makes a huge leap when suggesting reconnaissance units led to fighter squadrons.

First of all, lets examine the humble beginnings of the airplane. [Here] (http://upload.wikimedia.org/wikipedia/commons/8/80/WrightFlyerSmithsonianMay1982.jpg) is the Wright Flyer, the famed bird that took off at Kitty Hawk on December 17th, 1903. The Wright's immediately tried to promote it as military asset, which had some European countries interested (Britain and France mainly), although military strategists recognized that it was woefully underpowered and cumbersome. How underpowered? The Wright Flyer had a 12 hp 4 cylinder engine. After 2 years of tweaking and development, the Wright brothers introduced their Wright Flyer 3, but this only had a 20 hp engine, allowing for a max speed of 30-35 mph. This brings us to one of the first problems with early aircraft: the engines were very weak. A 20-40 hp engine may allow you to get airborne, but the turning capabilities of the aircraft are going to be severely limited. Also, the airplane has to literally be designed around the engine itself. This leads us to our second problem with early military aircraft: engine weight. Larger engines (which did not necessarily result in more hp or a higher efficiency) weighed more, and the weight had to be offset by lighter construction techniques. This is the era in which biplanes and monoplanes competed for dominance, and wood and canvas were the materials of choice. Designers had a very small window of power, lift, and weight, with each factor usually adding or subtracting from the other two in a detrimental way.

So early planes (pre-1910) had lightweight and fragile airframes centered around bulky, under powered engines. Airplane technology slowly evolved as engineers began to test new concepts, including radial engines, thicker vs thinner vs longer wings, etc. Airplane design also improved due to international competitions such as the Schneider Trophy and the Gordon Bennet Trophy, which saw nations competing in time trial events. These aircraft were the fathers of the early WW1 aircraft, which placed a premium upon lightweight construction in order to squeeze out every mph of speed.

Thus, once the war started, aircraft designs that were already in use were quickly militarized. The logical place for these lightweight, fragile aircraft was on the front line in a reconnaissance role, however there remained a few major obstacles. One obstacle was not the technological limitations or the practicality of the aircraft, but the hesitancy of the High Command on both sides of the battle to employ these new weapons. In fact, an article of the 1899 Hague Peace Conference expressly outlawed the use of "the launching of projectiles and explosives from balloons, or by other new methods of a similar nature" for 5 years, which can be found [here.] (http://www.icrc.org/applic/ihl/ihl.nsf/Article.xsp?action=openDocument&documentId=C372920FFD61039AC12563CD00516126) Also, the Gordon Bennett races were initially viewed by the military as trivial competitions, where Marshall Ferdinand Foch once famously stated "Aviation is good for sport, but for the Army it is useless!"

This leads us to a third limitation: airframe fragility. By design, the aircraft had to be light enough to be maneuverable and airworthy, yet couldn't fall apart if put into a dive or a turn. This is where the Gordon Bennet and the Schneider races helped the war effort. Had the Triple Entente and Triple Alliance been forced to develop these advances during the war, the airplanes that we know today as the workhorses of WW1 might not have been developed, or been used to the extent that they were.

I'm not a WWI historian, or any historian by any stretch of the imagination, so I'm sure someone else will give a more comprehensive answer here. But... I can tell you from what I remember from a childhood obsession with planes (used to own tons of books on military aircraft) that all the major forces in the war had some air power. Military aircraft developed greatly during the course of the war. Early in the war, planes were limited to mostly reconnaissance roles. This was because early bombers were fairly ineffective and forward firing machine guns were not yet available. Early bombers could not hold many bombs and the bombardier just tossed bombs and grenades from the plane using his naked eye. There were some early fighters, though. They were generally two-seaters, as they had rear-mounted machine guns to avoid shooting their own propellers off.

In 1915, the Germans invented the synchronization gear, which kept the machine guns from firing when the propeller moved in front of them. This opened the door to more advanced fighters, the ones we usually think of when we think of military aircraft. By the mid- and late war, fighters that have entered the popular consciousness such as the British Sopwith Camel and the German Fokker Dr. I triplane were created. (The Camel is the plane that Snoopy imagines himself flying, and the Dr. I was the fighter of choice of the infamous Red Baron (Manfred von Richthofen), the winningest ace in the war.) Bomb sights and heavy bombers such as the Gotha G. IV were also developed during this time. Air raids on cities became a possibility and were used in attempts to defeat enemy morale.

Balloons also played a role. Reconnaissance balloons were commonly used. Zeppelins were used as bombers, but they fell out of favor by mid-war due to the development of better fighters and incendiary rounds that made them easy targets.