Earlier quoted context omitted.
Even more awesome: Skip the extra Arduino and use the ESP8266 as your Arduino. https://github.com/esp8266/Arduino
I realise how silly this question may seem but here we go: If I get an ESP8266, I can have something that run code, sit on my home network wirelessly and use it to do things like report on sensor inputs? Am I missing some larger expense that would be required as this seems very cheap compared to other options I've seen.
You need to run it on 3.3v which means 3.3v versions of your sensore or external level shifting. You've got limited IO compared to, say, Arduino.
But of you've got 3.3v sensors - yeah - all you need is an ESP8266 and some way of providing 3.3v. (And probably some pulldown/up resistors and decoupling caps...)