one component of a clutch is a friction plate; it is a disc coated with a material akin to brake linings. This allows a moving object (your engine output shaft) to smoothly become one with another object moving at a different speed (your transmission). The clutch 'burns' when you hold it at that engagement point for too long and the friction lining overheats and you smell that acrid odor. It's a durable component and as long as you don't abuse it, say by using it hold the car at an incline, it'll last a long time.
Incidentally, when I'm at a traffic light and I know I'll be there for more than a few seconds, I put it in neutral and just hold down the brake. Less wear to the throwout bearing this way too...
