Balloons: Death from Above!!!

Summary

Balloons are “promoted” Wall Breakers that now attack from a hot air balloon. They drop bombs on the villages with a large area splash damage, but can be easily taken out by any anti-air defenses (such as the Air Defense).
Balloons are slow-moving aerial units that do devastating amounts of splash damage to ground targets.
Balloons, like Giants, target defensive structures first.
They are the slowest moving Troops in game.
Balloons explode and deal additional damage when destroyed.
Offensive Strategy

It would be advisable to destroy all aerial defenses such as Archer Towers, Wizard Towers and Air Defenses before deploying Balloons. Also beware of the Clan Castle; Archers and Wizards hiding in a Clan Castle will make short work of Balloons as well.
Balloons are exceptionally useful in the Single Player Campaign. You can simply destroy all of the Air Defenses, Archer Towers and Wizard Towers, then deploy a single Balloon. It will destroy every building. It takes a bit of patience, but it pays off at the end. With a Single Player Campaign, there is no time limit, so one unthreatened balloon will eventually destroy every building.
Important note: In many cases a single Balloon will take enough time to destroy the remaining buildings that your game will time out due to inactivity, which will cause your attack to end prematurely and be unsuccessful (regardless of how many stars you had earned to that point). To prevent this from happening simply change the view every few moments (by panning or zooming).
When raiding other players, time is limited, so make sure you take out all the Air Defenses quickly, then send in multiple Balloons.
Groups of five Balloons or more can usually overwhelm an Archer Tower. Nine Balloons is generally assured destruction unless there are Air Mines or an Air Defense nearby.
If Elixir is no object, dropping a Dragon near an Air Defense before deploying Balloons can protect them from being attacked for a significant amount of time, much like Giants can occupy a Mortar.
You can also send Balloons after Air Defenses themselves, but this isn’t recommended if the Balloons have a long distance to fly for they will be shot down quickly.
Although Balloons are slow moving, their damage is excellent; a good option is to speed them up with a Rage Spell. “Rage-Balloons” is an effective, if not often used, strategy (the only drawback is the time to train them).
Beware of Wizard Towers and Hidden Teslas, as they can cause quite a bit of damage before being destroyed, allowing Archer Towers to then destroy your balloons easily.
Some people forget to buy Air Defenses; Balloons (and Minions) are a great way to teach them the error of their ways.
Destroy the Air Defenses, as their sole purpose is to destroy air units (and they are very good at it). Mistakenly placing a Balloon while the Air Defense remains active will cost you!


Defensive Strategy

Generally, Balloons are relatively decent as a defensive unit: if a player is attacking only with troops that cannot target air units (Barbarians, Giants, Goblins, etc.), the Balloon is perfect for defending as it cannot be destroyed except by Lightning Spells. It is especially effective against Barbarians and Goblins as it does splash damage.
From a defensive standpoint, it takes quite a few Archers to take out the Balloon, which effectively weakens the raid. Its only major weaknesses are Dragons and Minions, both of which can destroy it easily without fear of counterattack. A single similar-level Wizard (up to level 3) is also able to destroy a Balloon due to its high damage output, but only if it has sufficient range to fire twice before the Balloon closes (the Balloon will kill the Wizard in one shot). Beyond level 3, two Wizards would be required.

IF YOU HAVE ANY ?????? Ask Eric LOL...

Here are a few quick tips about balloon attacks: (Disclamer: This is written while at TH8)

1) Balloons are almost worthless until L5 (possibly L4 but I never had any success).  Their slow speed and tendency to gather over a target makes them easy pickings for air defense, archer tower, and the wizard tower splash damage(hitting multiple targets per shot) at lower levels.  The 35-40% hp gains and 50% increase in damage between levels is what makes a balloon attack a strong option for a TH8 (the L5 damage/hp is 108/390 compared to 170/156 for the wizard and 31/670 for the giant).  

2) I typically pair balloons with other flying troops to take advantage of one of the main strengths of balloons, they make walls irrelevant.  My buildout lately has been 28 balloons, 2 dragons, 20 archers (for clan castle troops) and my clan castle with 12 minions.  I use the dragons to hopefully engage the air defense, then send balloons in behind them. The minions are quite fragile so don't use them until almost all of the defenses are gone.  Their combination of flying, speed and damage are used to clean up the rest of the battlefield, getting that 3rd star.

3) This is not a quick attack to build, nor is it cheap.  This attack can really only be used in war or revenge where the ability to scout your opponent and the time and cost to build your army are not real issues.  Troop cost alone for the attack for me is around 180K not counting spells and takes over an hour to make.  But it's still cheaper and quicker than a full dragon attack, and on many bases a better chance for three stars in my opinion.

4)  The balloon's biggest negative is speed.  The easiest way to counteract this is with scouting and spells.  When attacking a TH8, I try to drop a dragon in nearest to the two hardest to reach to air defense, followed by a rage spell, then 1/3 of my balloons.  The nearest air defense gets a healing spell followed by the rest of the balloons.  The rage spell is strictly for speed, and it's placement is critical.  Remember, the balloons are only attacking defenses.

5)  Finally, defense matters.  A L6 air defense can take down a L5 balloon in 2 shots, while a L3 AD takes 4 shots. That's a huge difference especially if the AD's are really deep into the base.  A L6 wizard tower is also bad news, given the balloons tendency to travel as a pack.  Not all TH8's are capable of being 3-starred by this attack(give that you are also a TH8).  You can and SHOULD 3-star ANY TH7 with this attack.

This attack is loads of fun because you just throw the troops out and see what happens (except the minions).  Remember to clear the clan castle but you get to forget about the BarbKing, he can't touch anything we are using.  I'll try to answer any questions or comments on here if I can. Enjoy!!