It will steal all kinds of wierd stuff, I know you can get some rabbit meat off rarabs, and you get pebbles from worms easy. I usually reserve it for Madragora/Pygmaioi, Fungars and Beastmen in that order.
Steal will initiate combat on success or failure. You can only steal items from creatures that drop an item that seems like it would be stealable (you can't pull the tail off a lizard, but you CAN gank a bone from a skeleton).
It is best to use when the mob is not focused on you and is in the middle of a swing.
If you are soloing a mob, you may be able to steal from it before it aggros you. I have found, however, that it's best to time it so you try to steal while the creature is attacking (meaning in the middle of its attack swing).
The chance of success is great when you follow the rules of stealing (that I mentioned here). Chances are terrible if you try to steal when the mob has aggro on you and isn't swinging.
Yes it initiates combat... or makes the mob attack you at least. So far in my 8 levels of thieving (and 3 of having steal and using it every 5 minuets) I have been unable to steal from trees, birds or lizards. I got a few beastcoins from Quadavs and a fishing rod from a Fisher, but no luck with normal monsters.
i believe you're thinking of the steal ability in everquest...to clarify, though it has been in later posts, this steals items, not gil, a later ability mug steals gil but at this time you also have "Gilfinder" wich does help you with the amount you get from mobs that drop gil...and combat is always initiated, weather you succede or not