Canal is a straightforward project which gives you a cost-reduction ability for the rest of the game. Cost-reduction is generally a very powerful ability, though its power often comes from the ability to stack multiple copies of your cost-reducer, making cards that are normally expensive (like Province) cheap or even free. Canal does not offer this, though it still finds use in the right environment. I will explain the three situations in which I believe Canal to be the strongest, then talk about when it might be better to skip Canal.
Cost-Restricted effectsWith Canal, you can Summon a Wharf, Artisan an Artisan, draw your 5-costs with Seer and so on. I believe these interactions to be the most powerful uses of Canal, so I recommend that you check for them whenever you see Canal on the board.
Multiple-Buy EnginesIf you are buying 3 cards every turn, Canal gives you as much payload as a Gold without adding a stop card to your deck. Put this way, Canal is a strong payload booster for any deck which buys multiple cards in a turn. It often is, though I would caution against thinking you 'have to' buy Canal in this type of game. The opportunity cost of Canal is often a Province, so you need to assess the game state before buying Canal. If it's still early enough that you want to add more payload to your deck, Canal can be a good way to do so, but if the game is close to over, it's ok to skip Canal and go for green instead.
Big Money and SlogsIf you are playing a deck that goes through shuffles slowly, then the fact that Canal gives you a benefit every turn makes it compare favorably to a card like Gold which only gives you a benefit once per shuffle. I would probably even buy Canal over the first Province in such a deck. Note that here the important characteristic of the deck is that we are taking many turns to go through a shuffle, so Gear Money benefits less from Canal than does Treasure Trove Money or a Mountebank slog (though Canal is probably still worth it in Gear Money).
When to skip CanalThe type of deck which benefits the least from Canal is the single-gain engine. If you have no relevant cost-restrictions, are only buying 1 card per turn, and are consistently drawing your deck Canal is just an overpriced Peddler.
Canal also anti-synergizes with trash-for-benefit cards since its cost reduction cannot be turned off. If Canal and the TfB card are both very strong on the board, it may be correct to go for both of them, but most of the time it is probably better to choose one or the other.
Edit: as crj points out, Canal actually makes remodel variants slightly better. The above should only be taken to apply to cards like Apprentice or Recruiter.
Canal is also weak on boards with other cost reducers. The problem with Canal on such boards is that, because of the other cost-reducers, you can often buy several important components for the $7 you spend on Canal. For this reason, it is usually better to build a deck which can play more copies of the other cost reducer than to buy Canal. This isn't to say that Canal is unplayable on such boards: if you happen to end up with $7 and only 1 buy, you often will buy Canal. That said, cost reduction tends to both increase the opportunity cost of Canal and compete with Canal's niche.
Edit: some of the comments take objection to the above paragraph. I think what I said mainly holds true for strong engine boards with other cost-reduction, but in other cases Canal can be more useful than I let on.
Hitting 7Canal is expensive, so there is a question of whether it is important enough to build your deck differently in order to hit 7 earlier than you otherwise would. The short answer is that it rarely is. In an Engine, you really only want Canal once you are already drawing your deck, at which point hitting 7 shouldn't be too much of a hassle. In Money/Slog decks, Canal is important, but you're already building your deck to hit high price points quickly, so nothing really changes there. The only case where you would go out of your way to spike 7 is where there is a game-defining interaction with Canal, such as being able to summon powerful 5-costs.
This was my first article, so feedback (whether about content or presentation) would be appreciated.
