A well-run wiki can be a wonderful thing for users and developers. Wikis offer the lowest possible barrier-to-entry for those seeking to contribute to the project. You just click and edit — the wiki software will keep track of the change, make sure you get credited, notify anyone who needs to be notified, and immediately publish the new content to the world.
However, wikis also require some centralized effort to maintain. When open source software project wikis go bad, they usually go bad for the same reasons: lack of consistent organization and editing (leading to a mess of outdated and redundant pages) and lack of clarity on who the target audience is for a given page or section.
From the outset, try to have a clear page organization strategy and even a pleasing visual layout, so that visitors (i.e., potential editors) will instinctively know how to fit their contributions in. Make sure the intended audience is clear at all times to all editors. Most importantly, document these standards in the wiki itself and point people to them, so editors have somewhere to go for guidance. Too often, wiki administrators fall victim to the fantasy that because hordes of visitors are individually adding high quality content to the site, the sum of all these contributions must therefore also be of high quality. That's not how collaborative editing works. Each individual page or paragraph may be good when considered by itself, but it will not be good if embedded in a disorganized or confusing whole.
In general, wikis will amplify any failings that are present from early on, since contributors tend to imitate whatever patterns they see in front of them. So don't just set up the wiki and hope everything falls into place. Prime it with well-written content, so people have a template to follow.
The shining example of a well-run wiki is Wikipedia, of course, but in many ways it's also a poor example because it gets so much more editorial attention than any other wiki in the world. Still, if you examine Wikipedia closely, you'll see that its administrators laid a very thorough foundation for cooperation. There is extensive documentation on how to write new entries, how to maintain an appropriate point of view, what sorts of edits to make, what edits to avoid, a dispute resolution process for contested edits (involving several stages, including eventual arbitration), and so forth. It also has authorization controls, so that if a page is the target of repeated inappropriate edits, senior editors can lock it down until the problem is resolved. In other words, they didn't just throw some templates onto a web site and hope for the best. Wikipedia works because its editors give careful thought to getting thousands of strangers to tailor their writing to a common vision. While you may not need the same level of preparedness to run a wiki for a free software project, the spirit is worth emulating.
Never allow open, anonymous editing on your wiki. The days when that was possible are long gone now; today, any open wiki other than Wikipedia will be covered completely with spam in approximately 3 milliseconds. (Wikipedia is an exception only because it has an unusually large number of editors willing to clean up spam quickly, and because it has a well-funded organization behind it devoted to fighting spam using various large-scale monitoring techniques not practically available to smaller projects.)
All edits in your project's wiki should come from registered users; if your wiki software doesn't already enforce this by default, then configure it to enforce that. Even then you may need to keep watch for spam edits from users who registered under false pretenses for the purpose of spamming.
If your project is on GitHub or some other free hosting site, it's usually best to use the built-in wiki feature that most such sites offer. That way your wiki will be automatically integrated with your repository or other project permissions, and you can rely on the site's user account system instead of having a separate registration system for the wiki.
If you are setting up your own wiki, then you're free to choose which one, and fortunately there are plenty of good free software wiki implementations available. I've had good experience with DokuWiki (https://www.dokuwiki.org/dokuwiki), but there are many others. There is a wonderful tool called the Wiki Choice Wizard at http://www.wikimatrix.org/ that allows you to specify the features you care about (an open source license can be one of them) and then view a chart comparing all the wiki software that meets those criteria. Another good resource is Wikipedia's own page comparing different wikis: https://en.wikipedia.org/wiki/Comparison_of_wiki_software.
I do not recommend using MediaWiki (https://www.mediawiki.org) as the wiki software for most projects. MediaWiki is the software on which Wikipedia itself runs, and while it is very good at that, its administrative facilities are tuned to the needs of a site unlike any other wiki on the Net — and actually not so well-tuned to the needs of smaller editing communities. Many projects are tempted to choose MediaWiki because they think it will be easier for users who already know its editing syntax from having edited at Wikipedia, but this turns out to be an almost non-existent advantage for several reasons. First, wikis in general, including Wikipedia, are tending toward rich-text in-browser editing anyway, so that no one really needs to learn the underlying wiki syntax unless they aim to be a power user. Second, many other wikis offer a MediaWiki-syntax plugin, so you can have that syntax anyway if you really want it. Third, for those who will use a plaintext syntax instead of rich-text editing, it's better to use a standardized generic markup format like Markdown (https://daringfireball.net/projects/markdown/), which is available in many wikis either natively or via a plugin, than to use any flavor of wiki syntax. If you support Markdown, then people can edit in your wiki using the same markup syntax they already know from GitHub and other popular tools.