This thread is intended to clear up any and all questions about the staff of herding and its uses. This is based off of my personal experience with the staff in game as well as various bits of knowledge I have gained while researching how to obtain the staff myself.
Q: What is the Staff of Herding?
A: It allows you to access the secret level in Diablo III, by following the road out of Tristram in Act I until you find the ghost cow.
Q: How do I get the Staff of Herding?
A: You need to collect a total of 5 items through various drops, as well as purchase an item costing 100,000g. There is a complete guide to obtain all the items in the following link: http://us.battle.net/d3/en/forum/topic/5151716273
Q: How long does it take to build the staff?
A: Personally, it took me about 45 minutes to completely build the staff, including research time. However, there are many reports of farming for 2-3 hours for a single piece of the staff, so the total time seems to vary greatly with luck.
Q: How much does it cost to build the staff?
A: To obtain the most basic form of the staff (normal version) it costs 150,000g. It then costs an additional 200,000g to build the nightmare version of the staff, 500,000g for the hell version of the staff. Currently the inferno version price is unknown.
Q: How to you obtain the pattern for nightmare/hell/inferno versions?
A: They seem to spawn randomly on the quartermaster in the main town of Act III
Q: Is the staff destroyed on use?
A: No, you can use the staff as many times as you wish.
Q: Does the nightmare/hell/inferno version of the staff work on lesser difficulties?
A: Yes, the staff can be used on any difficulty up to and including the difficulty stated in the prefix of the staff. (Note: normal version of the staff does not have a prefix, it is just the Staff of Herding)
Q: Does the staff gain any stats?
A: No, it is only used to gain access to the secret level.
Q: How difficult is the secret level?
A: The secret level is just as difficult as Act IV of the current difficulty. It scales as more players join just like any other level.
Q: Do I have to refarm the materials to build the nightmare/hell/inferno version of the staff?
A: No, after the first form of the staff is made you need only the previous version of the staff and a sum of gold to upgrade it.
I will try to answer any other questions that may crop up.