You can e-mail the entire class or selected students using the "QuickMail" feature. Navigate to your course and look for the QuickMail block on the right column of your course. Click on "Compose Email" and select the recipients. There is a button to "Add All" or you can select individual people to e-mail. Compose your e-mail and click on the "Send E-Mail" button at the bottom of the screen. QuickMail keeps a history of all e-mails you have sent which is available right under the "Compose Email" link on the course page.
By default, QuickMail is not available to students. If you would like students in your course or organization to be able to use QuickMail, send a request to firstname.lastname@example.org and the settings will be adjusted.
You can use the Announcements item in Moodle to create announcements that are displayed in Moodle as well as sent to the students in the course. Every course is created with a Announcements item in the top block. Adding a new topic will create a post in the Announcements, add an entry to the "Latest News" block in Moodle, and email your students.
Remember that any Announcements you make will get emailed to your students (even test posts!).
Faculty Services provides a listing of all the emails for the students registered for your course. You can copy and paste the listing from Faculty Services to your email program. Some people create contact lists for their courses using this feature.
When to use which feature?
For a general announcement, any of the above methods are fine. The Announcements area provides more places for a notice to show up, which is good for important events such as due dates for papers and not as good for reminders about who is bringing a snack for tomorrow's class.