We've lived in one for the past nine months while we're doing up the farmhouse. They're OK, but with some severe limitations.
Space is at a premium - you have to be obsessively tidy, otherwise things will rapidly get out of hand. Storage is often a problem - most caravans have plenty of cupboards and lockers, but they're small - ordinary-sized dinner plates won't fit easily, while crocks and saucepans all seem to be just too large to fit comfortably. The appliances (oven, fridge etc) are also on a toytown scale, so if you're keen on cooking you have to adjust your sights accordingly.
Another big problem is condensation. Most caravans have a gas fire and gas cooker (running off an LPG cylinder) and these pump out a lot of moisture. Add to that the moisture you exhale and you get a very damp environment in cold weather, where the vapour condenses on the colder bits (the aluminium door frames and single-glazed window panes particularly) and runs down. Conversely, in summer they can get extremely hot! The lack of insulation also means that they're not very soundproof - your neighbours, if you have them, will all be aware of every noise you make, and vice versa.
And, although most caravans have some sort of insulation in the walls, the floor is generally uninsulated - and if the wind can get underneath it can make for a chilly environment. Fit marine ply 'skirts' around the caravan to keep the wind out - and also to provide extra storage underneath.
Pick your location well - mains drainage or a septic tank is a must (no-one wants to be emptying nasty buckets in the middle of winter), while the water supply must be well insultated if you don't want to spend time dealing with frozen pipes. You also want a sheltered location out of the wind as even the most solid of caravans will rock alarmingly in anything more than a stiff breeze. Keep away from trees, though, otherwise you'll get covered in dead leaves and bird crap.
For me they're fine as temporary accommodation, but I wouldn't want to live in one permanently; but for a tidy, single bloke - maybe someone who's spent some time at sea - a static caravan could be ideal.