Having never transcribed a piece of music, what benefits can be had from doing this? Are there any reasons I should shy away from transcribing music or will it make me a better musician? How will it affect my playing?
Transcribing in its simplest form could be construed as listening to a piece and writing it down for others to play. It may be as simple as making a note of the chord changes and writing them; doing the same, but putting them into a different key; doing it as you listen to a piece for the first time.
At a deeper level, it's changing a piece of music. It may be re-arranging it for different instruments. At this point, knowledge of each instrument needs to be paramount. Sometimes a line of music may be very easy to play on the original instrument, but nigh on impossible on another. For reasons such as fingering or range.Or appreciating that it is a transposing instrument. What works sonically between two particular instruments may well not be successful in a blend of two others. At this stage, being a good transcriber helps - a lot!
For the record - transcribing and transposing are NOT the same, although to transcribe, one sometimes has to transpose!
So, it teaches the strengths and weaknesses of other instruments. It teaches how to balance instruments. It teaches what works well, or not, on various instruments. It teaches using ears to change what's heard into what can be read. It teaches how to 'hear' written music - not just on a chosen instrument. It teaches how to be a rounded musician rather than a just a flautist or a guitarist.
One thing transcribing will teach is an excellent musical ear - identifying intervals, chords, rhythm, etc. As well as the converse - being able to hear written music in your head better.
This will aid you in many areas of music.
Transcribing shows and teaches you how a piece of music works, how it's put together. What IS the bass, the drums etc. actually doing? Absolutely invaluable if you aim to write your own music, or to understand your part in existing music. You may think you can hear and copy what your models are playing - so prove it by writing it down! There will be more detail than you thought.
I will add to Tim's comment that it forces you to concentrate on details that you might have glossed over. I recently recommended using pencil and staff sheet for composition, but it applies here, too. This can be quite effective in that regard.
However, pausing to enter what you transcribe into a program that will play back your work also helps you to check it effectively.
A lot of this music activity is putting up with repetition and detail. Depending on what you are trying to get out of it, you will come up against your outer limit of patience and interest. You cannot be wrong about this, (unless you are in conservatory, or somewhere where you have committed to a program of learning prescribed by others.)
And like so many other musical activities, it starts slow, but picks up considerably. Once you learn it, it is difficult to unlearn. Riding a bicycle, in a way.