Diplomacy is often compared to chess, since there is no chance involved in either game besides outguessing your opponent. It's all skill.

Henry Kissinger and his cronies reportedly enjoyed playing the game in the White House because of its realpolitik overtones. Every player is in it for themselves, but they can choose to help out others inasmuch as it will allow them to eventually prevail over their ally. Or, as Richard Sharp put it in The Game of Diplomacy (A. Barker, 1978):

The game, in short, is based on a paradox: I cannot win unless you help me, but you want to win too, so why should you help me? This problem is at the root of all the different strategies employed in the game: in the simplest idea, two players unite, assisting each other to become powerful, each confident that when the time comes he can decisively attack the other and win. In the more complex sort of game, several countries - ideally all seven - attempt to play off their neighbours against one another, some growing steadily fatter on the proceeds of other people’s wars while others find themselves mysteriously dwindling.
Perhaps the most unique aspect of the game is that each player starts out in a completely different position, based on which country they're playing. Virtually everyone who's played more than a few games has a couple of favorite countries and a couple of countries that they would never want to be stuck with. Here's a rundown of what the powers are like:

Austria

Advantages: Austria is centrally-located and has easy access to many supply centers, most notably the Balkans. There are also buffer territories on the borders with Russia and Germany, making it easy to spot an offensive from the north before it begins capturing supply centers.

Disadvantages: The most notable disadvantage that Austria faces is Trieste, its only seafront territory. Since Austria starts with a fleet in Trieste and Italy starts with an army in neighboring Venice, it's easy for an Austrian player to be wiped out early on by a sneak Italian attack, especially since Italy often has to rely on taking Austrian supply centers in the early game to keep itself afloat. Not only that, but the fleet in Trieste is basically useless, with nowhere to go as long as Italian and Turkish fleets are challenging each other for the eastern Mediterranean.

Usual strategy: Many Diplomacy strategists believe that the key to winning with Austria is an early alliance with Germany: an Austro-German alliance tends to allow both countries to focus on their more deadly enemies. Dealing with Italy is more difficult, because a truce between the two countries is far more beneficial to Austria than it is to Italy. However, some players have successfully engineered "triple alliances" between Germany, Italy, and Austria that take over the map from the center. The only real constant in Austrian strategy is Turkey: because Austria and Turkey both need the Balkans for their initial expansion, it is almost inevitable that the two will battle from the early game onward.

Best suited for: Experienced players. Novices will probably be wiped out within four turns if they play Austria. A skilled diplomat can have great fun converting the country's strategic weaknesses into tactical strengths.

England

Advantages: Insularity. Because England is on an island, it's difficult to attack and even harder to overrun. Some strategists call England the "Wicked Witch of the West" because of its impregnable position.

Disadvantages: England's insularity makes it difficult to expand onto the Continent, and especially difficult to obtain enough centers to win.

Usual strategy: Most people who play England decide to ally with either France or Germany. The Anglo-French alliance is not easy to implement well, but it usually involves England moving to the east against Germany and Russia, defending France's Atlantic flank, while France mops up on the Continent. The more popular Anglo-German alliance usually pits England against France and Germany against Russia or Austria. The Anglo-French alliance's major drawback is that England usually has to stab France in the end for a win, whereas the Anglo-German alliance often leads to an English victory without a stab.

Best suited for: Intermediate players who can maneuver fleets well. England often does remarkably well in the game, but it has to be played "by the book" because of its dearth of strategic options.

France

Advantages: France is versatile: it can credibly attack three different countries at the start of the game, and has three supply centers within immediate reach of its units. It also borders on both the Mediterranean and Atlantic, allowing it to project naval power around the map without using the Strait of Gibraltar.

Disadvantages: Playing France demands a good long-term strategy: once you start moving, it's difficult to change objectives mid-game. If game conditions change too much from what France is expecting, France usually ends up in a draw.

Usual strategy: Germany and Italy tend to be France's best alliances, although France can realistically ally with just about any country and still win (with the possible exception of England). The central powers tend to be more useful to France than the eastern ones, simply because they can help fend off potential attackers earlier in the game. The best way to formulate a French strategy is to pick eighteen supply centers on the west side of the board, and then do everything possible to capture them.

Best suited for: Beginning to intermediate players who want to experiment. It's difficult to win with France, but there are many options, and it's a good way to become acquainted with the entire map.

Germany

Advantages: Germany is the most versatile power in the game, capable of winning in just about every direction on the board if played correctly. It has early access to four supply centers and can make deals from the beginning of the game with five of the six other powers.

Disadvantages: Novices tend to lose when they play Germany, since its central position makes it vulnerable to attack unless the surrounding countries' interests are focused elsewhere.

Usual strategy: The "Anschluss" strategy, where Germany helps Austria defend itself against Russia and Italy, is one of the most common German moves in the game. German-French and German-Italian alliances can also work very well if handled properly. Most good players wait until the midgame to begin engaging other powers in combat, since Germany can easily play them off against each other with good diplomacy. England and France are usually the biggest obstacles to a German victory, and there are few scenarios where Germany can win without eventually taking over one or the other. Russia often proves to be adversarial, too.

Best suited for: Intermediate to advanced players with an excellent grasp of the board's geopolitics. Germany requires more negotiating and dealing than any other country, because of its constantly changing relationships with every player at every stage of the game.

Italy

Advantages: Italy's position is isolated from most countries' victory lines, making it a likely candidate to survive the course of the game. It is also capable of winning the game in several areas of the board.

Disadvantages: Because of a lack of good offensive options early in the game, Italy wins less often than any other country: it usually hangs around for the duration, obliquely playing into the larger countries' plans.

Usual strategy: Italian survival generally depends on an early defeat of either Austria (by attacking Trieste) or Turkey (by convoying into Syria). Usually, this requires an alliance, and Italy is more disposed to a permanent alliance than any other country in the game. Russia, Austria, and Germany are all fairly logical candidates for alliance.

Best suited for: Nobody. Virtually all players agree that Italy is inferior to the other six powers. A very skilled diplomat can win with Italy, but less experienced players will probably find it to be a futile platform for victory.

Russia

Advantages: Russia starts with an extra fleet and can project naval power on both sides of the board from its home ports. It is also impregnable at the start of the game, and cannot be attacked without overt preparation.

Disadvantages: Both St. Petersburg and Sevastopol are hemmed in by other countries (Germany/England and Turkey respectively), making it difficult for Russia to make effective use of its navy.

Usual strategy: Russia usually wins by allying with Italy or Austria, with whom it can handily split up the board. The strongest Russian alliance by far is with Turkey (called the "Juggernaut"), but obvious victories will usually cause the Western powers to coalesce and hold the East back behind Austria. Because of this, Russia and Turkey usually fight several times during the game, which can either be genuine or deceptive in nature. The typical Russian adversaries are England and Germany, which get in the way of Russian expansion in the north.

Best suited for: Intermediate players with a militaristic bent who don't mind stepping on everyone else's toes.

Turkey

Advantages: Turkey has the best defensive position in the game, even better than England's. If attacked, it can concentrate its defenses in the corner and survive just about any onslaught.

Disadvantages: It is difficult for Turkey to move its armies onto the Continent, and maddeningly slow to bring fleets from the Black Sea to the Mediterranean through Constantinople. Turkey is also in the worst diplomatic position of all the countries, as there are only a few instances in which another country is disposed to help the "Wicked Witch of the East." Most Diplomacy players find it to be the most boring country in the game.

Usual strategy: Turkey has to be either allied or at war with Russia from the beginning in order to win. The Russo-Turkish alliance is strong when employed correctly (see above), but tends to benefit Russia more than it benefits Turkey. Italy and Austria are natural enemies of Turkey because of their location, although it is sometimes possible to play one against the other.

Best suited for: Beginners and militarists. Turkey is hard to kill and hard to win with.