Simply put, it's being aware that you're dreaming. Once you're aware, you can shape your dreams. But be careful... don't think dark thoughts unless you're ready.
Yes, I believe so. While it's reported that 22% of people lucid dream every month, I do so nearly every day. There are ways to initiate it but it might take time. Again, I've been doing this for nearly 3 decades so my normal might be extreme.
Try doing something different. Usually there's something off. In my dreams I can't do simple math, think 3x4, but no one notices. Often times textures and temperatures don't translate and colors are slightly off. I can't fall; please don't test this to see if you're dreaming. Let me know what you discover about your lucid dream limitations.
Hmmm.... that's a tough one to answer. Yes, in that you can experience waking nightmares; if you're not used to this it can be frightening. It happens to me more often than you'd think. No, in that as long as you know you're lucid dreaming you are in control.