1) Have you visited Europe? Where did you stay? What did you do?
I live there Anyway, I've been almost all over Europe, and if you plan on seeing as much of Europe as possible fairly cheap I'd recommend travelling by "Interrail", even though it's a bit more backpackery.

2) Has anyone stayed at a hostel? Any recommendations on that?
Yes I have. There are also many cheap hotels in the big cities, that's mostly what I've lived in, but as for hostels there usually isn't a problem with finding one that's good. "Die Jugendherberge", which is what I think it's called, in Berlin is e.g. pretty good and rather cheap.

3) Do people tip in Europe?!
Yes, of course.

5) Someone explain this "rail pass" thing to me?
By this I think you mean "Interrail"? It's where you buy one ticket that lasts for a certain amount of time. Within that timeframe you can then travel by train as much as you want for free, and I mean only train.. no busses included. It's a cheap way of travelling (you save more money by travelling with interrail in Western Europe than in Eastern Europe, though.) For more info click here.

6) Other information. Tell it to me.
If you want culture visit the capitals, but I guess you know that.