Generalized gradient approximations (GGA's) seek to improve upon the accuracy of the local-spin-density (LSD) approximation in electronic-structure calculations. Perdew and Wang have developed a GGA based on real-space cutoff of the spurious long-range components of the second-order gradient expansion for the exchange-correlation hole. We have found that this density functional performs well in numerical tests for a variety of systems: (1) Total energies of 30 atoms are highly accurate. (2) Ionization energies and electron affinities are improved in a statistical sense, although significant interconfigurational and interterm errors remain. (3) Accurate atomization energies are found for seven hydrocarbon molecules, with a rms error per bond of 0.1 eV, compared with 0.7 eV for the LSD approximation and 2.4 eV for the Hartree-Fock approximation. (4) For atoms and molecules, there is a cancellation of error between density functionals for exchange and correlation, which is most striking whenever the Hartree-Fock result is furthest from experiment. (5) The surprising LSD underestimation of the lattice constants of Li and Na by 3--4 % is corrected, and the magnetic ground state of solid Fe is restored. (6) The work function, surface energy (neglecting the long-range contribution), and curvature energy of a metallic surface are all slightly reduced in comparison with LSD. Taking account of the positive long-range contribution, we find surface and curvature energies in good agreement with experimental or exact values. Finally, a way is found to visualize and understand the nonlocality of exchange and correlation, its origins, and its physical effects.