Under what circumstances would a U.S. lawyer seek to obtain a U.S. LLM? Is it solely because he or she wishes to enter academia? Or is it also helpful for practicing in a law firm, in-house, or government position? Does the LLM meaningfully advance a U.S. lawyers ability to practice in a specific area, such as environmental law or health law?

I am not a US lawyer, but I believe that a US lawyer who obtain LLM in taxation has a much better chance to find a job in that area.

I would estimate that 75 percent of US lawyers taking the LLM are tax lawyers. 15 percent try to pimp their TTT law school degree with an LLM from a top school. The rest is doing specialized LLMs such as IP, real estate, environmental law, health law... .

Only a few US lawyers do the LLM to enter academia, and I think these usually go to YLS or Harvard and try to switch to the SJD/JSD. Here some useful discussions for aspiring academics.

http://www.llm-guide.com/board/37042
http://www.llm-guide.com/board/13943

Like the LLM, the SJD/JSD route seems to be considered mainly by foreign law students who plan to go into teaching
http://prawfsblawg.blogs.com/prawfsblawg/2006/03/how_to_design_a.html

I am from India and there are many reasons why an Indian would do LLM in India (a corollary to the general question).

1) Some people take that much extra-time to take decisions regarding their career and here LLM is 2 years. Its a healthy time to take long-term decisions.

2) It is a chance to build upon specialisms, especially in IP, Property, Criminology, Tax, Finance. These are fields that are not highly specialised at the degree level (LLB/JD).

3) Many governmental departments have accelerated oppurtunities for those having advanced levels of studies in law.

4) Many budding NGO workers employ this time to build upon their CVs.

5) Entering Academia remains a central point of attraction for many.

6) For many, it is about preparing for Civil Services Examination and they would join LLM only to be within the folds of an organisational structure.

7) Policy developers require high levels of expertise and LLM is only a beginning for them.

Under what circumstances would a U.S. lawyer seek to obtain a U.S. LLM?

I bet the number of applicants from the USA is up everywhere this year. VERY tough job market now for JDs.

That will affect the job market next year, even if the financial crisis abates over the next months.