Soft Shell outdoor clothing is difficult to define because it covers a wide spectrum of products. Soft Shell products exist somewhere between fully waterproof and ultra breathable on the spectrum. The majority of Soft Shell garments are not waterproof, but only water resistant. Although, confusingly, there are some notable exceptions to this, like GORE's new seam taped, waterproof soft shell! Confused? You should be!
If you are looking for a garment with a greater level of breathability than is available with most hard shells, and do not require a fully waterproof product, Soft Shell could be the answer. It's worth bearing in mind however, that there is a significant differance between waterproof and water resistant. Most Soft Shell offers some degree of water resistance. If the heavens open and you're wearing a water resistant garment, you may find that you get very wet!
In dry environments, Soft Shell is an excellent choice. This is simply because it offers a much higher level of breathability than an equivilent, fully waterproof hard shell garment. For high activity outdoor pursuits, where the participant will be strenuously exerting themselves and will most likely be sweating, ultra breathable Soft Shell is an excellent choice. When running or cycling at high intensity for example, the participant will be running hot and wet from sweating and so may not be concerned about getting wet from rain water. In fact, they may actually be grateful of the cooling effect the rain has on them! Soft Shell is particularly suited to high intensity sporting activities.