When cooking with lemongrass, you can use fresh, dried or powdered leaves. For more on using fresh lemongrass, see this photo tutorial on how to cook with fresh lemongrass.
Lemongrass & Health
In some parts of India, lemongrass is considered to be an essential plant in Ayurveda. It is commonly used to alleviate colds and congestion in India and elsewhere. Some people compare it to ginger in this regard. (Interestingly enough, in Kerala, India, the name for lemongrass translates to "dried ginger coffee.")
Fresh or dried lemongrass can be steeped or boiled to make an herbal infusion or decoction. Generally speaking, about one teaspoon lemongrass leaves (chopped from fresh leaves or measured from broken, dried leaves) per cup of boiling water is a good ratio. Here are a few lemongrass herbal infusion recipes to get you started: detox teas and is sometimes used in Americanized masala chai spice mixtures (especially ones with plenty of ginger).
Commercially available tea / herbal tea blends that contain lemongrass include Mighty Leaf's Ginger Twist, Rishi Tea's Green Chai and Good Earth's Ginseng Green Tea.
You can also make lemongrass tea / herbal tea blends at home with recipes like Lemongrass-Ginger Iced Tea, Sweet Texas Dreams Iced Tea and Tropical Herb Tea.
I also recommend blending hot lemongrass tea with infused / boiled ginger root, mint and / or cinnamon. Iced lemongrass tea is delicious with peach nectar, sliced cucumber or infused / boiled ginger. In more complex lemongrass drink recipes (such as lemongrass cocktails), ingredients like coconut milk and hot chillies can also work well.
Lemongrass is also used in a wide range of food recipes, including many Thai food recipes. As About.com's Local Food Guide notes, lemongrass is great in chicken and seafood dishes. Famous lemongrass dishes include: