Taler does not use any Blockchain technology or Bitcoin directly. Taler is not based on proof-of-work or any other distributed consensus mechanism. Instead Taler is based on blind signatures.
It would be possible, however, to withdraw coins denominated in Bitcoin into a Taler wallet (with an appropriate exchange), which would give some benefits over plain Bitcoin, such as instant confirmation times.
Your wallet stores digital coins and thus ultimately your computer holds your balance. The exchange keeps funds matching all unspent coins in an escrow bank account.
Since the digital coins of value in your wallet are anonymized, the exchange can not assist you in recovering a lost or stolen wallet. Just like with a physical wallet for cash, you are responsible for keeping it safe.
The risk of losing a wallet can be mitigated by making backups or keeping the balance reasonably low.
In case of a compromise of one of your devices, an attacker can spend coins from your wallet. Checking your balance might reveal to you that your device has been compromised.
If your friend provides goods or services for you in exchange for a payment, they can easily set up a Taler merchant and receive the payment in their bank account.
Future versions of the Taler wallet may allow exchanging coins among friends directly as well.
Taler wallets can store digital coins corresponding to multiple different currencies such as the Euro, US Dollars or Bitcoins.
Taler currently does not offer conversion between currencies.
Your wallet stores digital coins that are blindly signed by an exchange. The use of a blind signature protects your privacy as it prevents the exchange from knowing which coin it signed for which customer.