Heavy Water (D₂O) is a compound of an isotope of hydrogen called heavy hydrogen or Deuterium (D) and oxygen. Deuterium has an atomic mass of 2, as against 1 for normal hydrogen (H) due to presence of an extra neutron in the nucleus. Deuterium is present in hydrogen and hydrogen bearing compounds like water, hydrocarbons, etc. and has a small natural occurrence (D/D+H) of about 140 to 150 ppm. So it is necessary to process large quantities of the low concentration feed stock to produce the final product which is enriched to the reactor grade i.e. 99.8 mole %. Heavy Water has great similarity in its physical and chemical properties to ordinary water. But its nuclear properties display a significant variation which makes it an extremely efficient material for use as moderator in a nuclear reactor.

Moderator is required in a thermal reactor to slow down the neutrons produced in the fission reaction to .025 ev so that the chain reaction can be sustained. Different moderators normally in use are Heavy Water, Graphite , Beryllium and Light water. Heavy Water is an excellent moderator. A good moderator should have excellent slowing down power and low absorption cross section for neutrons.

Heat energy produced in the fission reactor will be removed by coolant. Water is an excellent coolant that can remove the heat from the feed. Heavy Water is used as a primary coolant to transport heat generated by the fission reaction to secondary coolant, light water. In Gas cooled reactors carbon di-oxide gas is used as coolant. Coolant transports heat to secondary coolant, i.e water for generation of steam at an appropriate pressure for running steam turbines. Steam turbines drive generators to generate Electricity. 

Because some of the deuterium in heavy water gets converted to Tritium by absorbing a neutron a nuclear reactor. Tritium is radio active. Further, some of the ionic impurities that are carried by heavy water as moderator or coolant also get activated in course of irradiation. Hence the radio activity is observed in Heavy Water used in Nuclear reactors.

Heavy Water has greater affinity for light water. It can readily absorb light water present in air. It can also get degraded whenever light water from other processes gets mixed with it.

No. But if it is being used in reactor then the limiting factor in usage is due to radio-activity build up during operation of Nuclear reactor. It can be reduced by removing the activated products.