There have been some great replies by some of the other posters. I'll just throw in my two cents.
Department chairs are usually distinguished physicians, who are often accomplished in patient care, research, teaching, and administration. Because their names tend to be well recognized, a strong letter of recommendation written by the chairman on your behalf can do wonders for your residency application.
One of the first questions you should ask yourself is whether you need a chairman's letter. Some specialties require a chairman's letter to be a part of your application while others have no such requirement.
If a letter of recommendation is needed from the department chair, then the next step is to make efforts to secure a strong letter of recommendation. Although some students may have had the opportunity to work with the chair in some capacity (clerkship, research), many students may not have had a chance to interact with the chair. If the latter is the case, students often wonder how the chair could possibly write a strong letter of recommendation. If you find yourself in this position, you need to make some efforts to get to know the department chair. As soon as you are sure of the specialty you want to go into (or even before you are sure), it's a good idea to set up an appointment with the department chair. At this appointment, you can introduce yourself and your interest in making the specialty your career. You can then set the groundwork for future appointments. You can also try to be visible to the chair at other times (e.g., grand rounds, conferences). These interactions will help the chair get to know you.
The key to securing a strong letter of recommendation from such an individual is to make sure that they get to know you. As a general rule, department chairs tend to be less effusive in their letters of support, especially if they don't know you well. That's not to say they won't write a good letter for someone that they don't know well but there is a difference between a good letter and a great letter. A great letter of recommendation includes specific examples about you. Letters with this sort of information are much more effective and powerful than letters that simply reiterate your accomplishments from your CV or just praise you. Details often convince the reader that the praise is actually true. It's difficult to secure this type of letter from a chair if he or she doesn't know you very well.
In one of the above posts, the question came up about whether or not to ask the chair to be your advisor. You should certainly consider the chair as a possible advisor because he or she has reached the pinnacle in the specialty and is likely to be well respected. But if the chair is away at a meeting every other week and is not accessible to you, it doesn't do you a lot of good.
Hope this helps,
Samir Desai, MD
Assistant Professor of Medicine
Baylor College of Medicine