One major flaw with Google Analytics is its last click attribution which simply distorts your view of where traffic is coming from. If visitor first came via a Tweet, reads about your product and the next day he searches or types in your web address, GA would attribute the last traffic source as the real source of this visitor. You would never realize that it was tweet that brought him to the website.
Seldom any visitor converts on first visit and so it becomes extremely hard to calculate true conversion rate for different mediums in GA. How would you know which medium is most effective?
I haven't worked with this setting myself so I can't say whether it works on all traffic sources or only campaigns. First Referrer information is stored in one of the GA cookies, so it's always available on the page, even if it's not getting passed to the GA servers. If you really wanted to get creative, you could yank it out of the cookie and throw it into a Custom Variable. This has the advantage of giving you First and Last Attribution, in different reports.
Seldom any visitor converts on first visit and so it becomes extremely hard to calculate true conversion rate for different mediums in GA. How would you know which medium is most effective?