Mark Twain did it. So did Lewis Carroll and George Sand. And Nora Roberts, Robert Heinlein and thousands of other modern writers.
There are many reasons a freelancer might consider taking up a pseudonym: a common name, an opportunity to write a bodice-ripper, a preference to keep one’s private life separate from one’s work. Generally, however, a pen name is nothing more than a polite fiction — it appears in print, but you sign contracts and file for copyright using your legal name, with your pseudonym noted as such in paperwork.
If, for instance, you were to file a copyright under your pen name, and later needed to enforce it in a court of law, the case stands a chance of being thrown out, or drawn out and very expensive. You can face legal problems if you sign contracts using a pen name, as well.
Some writers have been known to use a pseudonym to get around contract restrictions — i.e. a freelancer may be have signed a contract to write about business topics for one website exclusively, but an opportunity to write a piece for another site might crop up. If something similar happens to you, be aware that doing so still counts as breaking the contract. It may be easier to simply talk to everyone involved rather than try the round about tactic of a pen name.
A writer might also use a pseudonym if he or she is attempting to write about a topic that might be problematic — for example, a doctor writing about the dangers of a particular hospital might be exposing his professional career to damage, or a writer covering a powerful figure involved in crime. While this is a reasonable action to take, generally one cannot rely on a pseudonym as one’s primary form of protection.
There are a wide number of factors to take into consideration if you want to use a pseudonym. There are many benefits, however: a writer can avoid being typecast into a particular topic or genre, most people won’t go to the effort of looking up copyrights, and it can be used as a marketing tool.