Recovery (while possible in all game modes) is useful in Career mode to regain funds (as of 0.24). It is only possible to recover craft landed or splashed on Kerbin. Depending on the distance from the recovery location to the Kerbal Space Center, a portion of the initial cost to buy the parts and resources is returned.
A craft or Kerbal can be recovered both from the Tracking Station and from the top of the HUD when controlling. Other parts or Kerbals which are not a part of the craft (ie, detached or on EVA) upon pressing "recover vessel" will not be recovered with it, but may be recovered separately.