Unfortunately it only implements the curly-brace SCSS syntax, not the indented SASS syntax [1] (which is weird considering it's called Libsass, not Libscss), and there are no plans to support both syntaxes.
The companies I have worked for all use the indented syntax, since it meshes very well with HAML and CoffeeScript. But it looks like more people use the brace syntax (roughly 980k SCSS files on Github, vs. 85k SASS files).
I don't know. I wish developers could stop reinventing/tweaking stuff that isn't particularly broken (the differences between HAML and Slim, for example, are marginal and not really interesting) and start standardizing on something. Node, meanwhile, seems to have standardized on Jade.
We do want to support the indented syntax eventually (and I believe it should be possible with a relatively simple pre-processing step), but it's still a low priority compared to reaching feature parity with the canonical implementation.
The companies I have worked for all use the indented syntax, since it meshes very well with HAML and CoffeeScript. But it looks like more people use the brace syntax (roughly 980k SCSS files on Github, vs. 85k SASS files).
[1] https://github.com/hcatlin/libsass/issues/16