Hitting the head is essential for making the crowbar useful because of the 8x damage multiplier that headshots give. Otherwise, it simply does too little damage to be useful.
The crowbar is a decent weapon for melee users early in the game. It has slightly more range than the combat knife does.
Crowbar users should remove it in favor of the sword and the Dragon's Tooth sword as soon as they can because they do much more damage than a crowbar does and have a longer range.
In Deus Ex, as with other melee weapons, hitting someone with the crowbar after spraying them with the pepper gun makes the crowbar far more effective. Enemies stunned with pepper spray will take four times the damage they usually will, making the crowbar far more effective than usual.