Volkswagon began offering the 20v 1.8T engine with the introduction of the New BeetleTurbo (99), MKIV (00+) Golf, GTi, and Jetta, and B5 Passat (97 or 98). It is a four cylinder engine, either being a transverse configuration such as in the smaller VW's, or longitudinal in the larger Passat and Audi's. The 20v means 20 valves total, 5 for each cylinder, 3 of which are used for intake, 2 for exhaust. 1.8 meaning the engines displacement, and T for turbo. This engine was designed to offer a nice medium between the 2.0's gas mileage and VR6's power. The 1.8T was built from the ground up as a turbo engine, meaning it is a much better design than a naturally aspirated engine with a turbo put on as an after thought. Manufacturer stated gas milage is averageing 28mpg city, 34mpg highway, using 93 octane fuel and 5w40 synthetic oil. This varies though depending on manual or auto, and vehicle weight, such as a Golf vs. a Passat
Not all 1.8T's are the same between models and years. The 1.8T offered in the Beetle is equipped with a smaller turbo, smaller exhaust, and various other weaker parts (small intercooler, injectors) that limit its capable horsepower to 160 maximum. The 1.8T in the Golf, Jetta, GTi, up to 2001 uses a better ko3 turbo and different engine internals, but the engines programming limits the boost to .6 bar. So this engine produces 150 hp from the factory. From 2002 up, the 1.8T is the same except for a remapped ecu which raises the boost to .8 bar and 180 hp. All the special editions (337, 20th, Wolfsburg, GLi) recieved the same 1.8T as their corresponding model year.
Audi's 1.8T is slightly different than VW's. On the Audi TT for example it has strenthened internals and an additional fuel rail, making around 225 hp. This was the base engine in the B5 (97-01) and B6 (02-05) A4, as well at the TT. This is basically the same engine as the one in VW's.
Although VW places the 1.8T in the middle of their engine lineup, it is capable of produceing horsepower comparable to the VR6. Though the VR6 is an excellent engine as well, the fact is the majority of car buyers simply wouldn't spend the extra money if they could have similar horsepower from a less gas thirsty engine. To get the 1.8T operating to its potential, a chip is required. This modification has by far the best cost:power ratio out there. Popular VW specific companies for this are APR, GIAC, and Revo. For the most part they all work the similarly, increasing turbo boost for more power, but all have their own unique charicteristics as well. Retail for these is generally around $500 US.