It never makes spelling errors, but contextual errors are common. As you can imagine, these can prove humorous at times. Like Doonesbury's strips on the Apple Newton handwriting recognition (back when Doonesbury was funny, not simply vicious), the word swaps can be fun -- to wit:
What I Said:: "The patient said Viagra wasn't working, and wanted to try Cialis."
What It Typed: "The patient said Viagra wasn't working, and wanted to try and see Alice."
Nice ... glad I caught that one before it got mailed to my referring doc...