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From the original page at http://www.state.gov/ circa 1998
The State Department or "State" as it is sometimes shortened, lays the foundation for how the U.S. Government will respond to given stimuli. For instance, the State Department formalizes the President's foreign policy by documenting who does what and when.
State also has the responsibility for stating the current U.S. position on various topics of world importance. For instance, in the last half decade, the U.S. State Department has been reporting on the battle against international terrorism, and publishes an annual report, Patterns of Global Terrorism, an excellent study on the years terrorist activities, background information on major terrorist groups, as well as lists nations are believed to be providing support to such organizations.
Most importantly, however, the State Department not only sets policy, but actively pursues that policy through Diplomatic Corps Foreign Service program. Foreign Service is more readily seen in the maintenance of embassies worldwide and their staffing with Foreign Service officers and of course, the country Amassadors. The Ambassador's serve at the pleasure of the Secretary of State, so in essence, he or she is the Chief Ambassador or Chief Diplomat. In fact, as Ambassador's act as liasons between governments, the Secretary of State becomes the final negotiator. Thus the Secretary of State is a world traveller and key figure in treaty negotiations. As part of the foreign operations, the U.S. Department of State's Diplomatic Security force is intrusted with the protection of foreign embassies and personnel.
The State Department is a major customer of the U.S. Intelligence Community, requiring the latest information avaialable both in terms of military information as well as economic and social affairs within each country of interest. In return for finished intelligence (and one would assume raw intelligence in some cases), State provides space for Foreign Service and active duty military officers to perform open AND clandestine information gathering. In the case of the clandestine, it is thought that an intelligence community specialist is housed in each of the embassies of the world. There might be a military intelligence office (presumably as part of the office of the Military Attache), a CIA officer, as well as a Foreign Service specialist all working to gather information through whatever means possible. Certainly there are Military Attache's found in each major embassy, the role thought to be a cover (at least under the supervision of the attache) for DoD's Defense Intelligence Agency operation in that country. Getting someone to admit this however is a fruitless exercise.
Regardless of the importance of the State Department's work, there seems to be a constant undercurrent of interagency fighting between State and the intelligence agencies as well as with DoD. Take a look at one military intelligence officer writes about the relationship between State, the DoD, and the Intelligence community.
Some of the key policy issues facing the U.S. Secretary of State are: