Swimming is an excellent cardiovascular workout. You can give a very strong effort, and since there is minimal body impact, you can give a pretty intense workout just about every day. It most definitely will help with fat burning, assuming that you are eating an appropriate, healthy diet.
It will assist in muscle building, but only so much as it takes to overcome the resistance of the water. Obviously, the faster that you swim, the more resistance you will have (Even though with a good stroke you will be more on top of the water than a poor stroke), but you won't get hulking muscles.
If you can, I would recommend swimming all four strokes (back/breast/free/fly) in various amounts, as each stresses the body in different ways.
As user3750 so cryptically points out, there is a significant emphasis on the anterior portion of the deltoids (shoulder muscles) and the pecs (chest), which can overpower the rear deltoids and give you the "round shouldered" look. If you do primarily freestyle, I would make sure that you add some supplemental exercises to balance out your deltoids.
Although many swimmers that you see on TV are fairly well muscled, remember that they are at the pointy end of the stick, and use dryland exercises and weight routines to maximize their potential, and they have all day to swim and work out. You will need to balance fitness and weights in combination if you want the same physique that they have.
As far as your short & intense vs. long and slow, the answer is yes. You want a combination of both, to stress both types of fibers in your muscles. Lats will be a primary motivator in a proper freestyle stroke, and your abs and lower back muscles will get good workouts as stabilization muscles.