Read Wes Platt's latest installment of RP-101, called "Tree of Knowledge."

Of particular trickiness for a new roleplayer is the concept of what one knows out of character as opposed to what one knows in character.

You can read this article or in the Articles section.

-Synozeer

I think Brody has made the issue far too black and white.  Using OOC information IC is obviously a bad thing as a general rule, but there are times when it really improve roleplay.  For example, in a mud with a low playerbase, two players might contact each other OOC to arrange a coincidental meeting IC - without being able to do that, they might well end up playing solo, which obviously doesn't give much opportunity for roleplaying.  Other encounters might involve sexually or violently explicit material, in which case it would probably be a good idea for both players to discuss the issue OOC beforehand.

You also have to remember that, while the player is going to know things the character doesn't know, the reverse is also true.  Bubba might have only been playing for ten minutes, but his character will have been living in the starting city for decades - so surely it would improve roleplaying were Bubba to download a map of the city and memorise it?  After all, what happens if a stranger from another town asks Bubba the directions to the bakery, and Bubba - who's character is supposed to have lived there his whole life - doesn't know?