This FAQ from the Anderson Mill MUD will probably answer a lot of questions for you. There are different MUDs for different neighborhoods. All have the power to levy taxes to help pay for critical services that the MUD provides. Some MUDs are better than others. I've heard some really horrible things about some Austin MUDs - corruption and mismanagement, etc. The MUD in our neighborhood is fantastic and has won several state awards for management. And, they keep reducing their portion of our property taxes instead of raising them, so we are big fans!
WhatisMUD