There are a number of good explanations of recursion in this thread, this answer is about why you shouldn't use it in most languages.* In the majority of major imperative language implementations (i.e. every major implementation of C, C++, Basic, Python, Ruby,Java, and C#) iteration is vastly preferable to recursion.
To see why, walk through the steps that the above languages use to call a function:
- space is carved out on the stack for the function's arguments and local variables
- the function's arguments are copied into this new space
- control jumps to the function
- the function's code runs
- the function's result is copied into a return value
- the stack is rewound to its previous position
- control jumps back to where the function was called
Doing all of these steps takes time, usually a little bit more than it takes to iterate through a loop. However, the real problem is in step #1. When many programs start, they allocate a single chunk of memory for their stack, and when they run out of that memory (often, but not always due to recursion), the program crashes due to a stack overflow.
So in these languages recursion is slower and it makes you vulnerable to crashing. There are still some arguments for using it though. In general, code written recursively is shorter and a bit more elegant, once you know how to read it.
There is a technique that language implementers can use called tail call optimization which can eliminate some classes of stack overflow. Put succinctly: if a function's return expression is simply the result of a function call, then you don't need to add a new level onto the stack, you can reuse the current one for the function being called. Regrettably, few imperative language-implementations have tail-call optimization built in.
* I love recursion. My favorite static language doesn't use loops at all, recursion is the only way to do something repeatedly. I just don't think that recursion is generally a good idea in languages that aren't tuned for it.
** By the way Mario, the typical name for your ArrangeString function is "join", and I'd be surprised if your language of choice doesn't already have an implementation of it.