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Recently I realised that if I don't have a microwave oven, I can use boiling water to heat up certain types of food by boiling water in a deep bowl, putting water and the food in a covered smaller bowl on top of the boiling water.
Is it a commonly used way of heating up? Also, which are the advantages of disadvantages of it, compared to microwave oven?
This is very common. What you are describing would usually be called either a bain marie or a double boiler. It is normally used for things that you don't want to overheat, such as hollandaise sauce, ganache, and some other dairy based sauces.
As for advantages and disadvantages, it really depends on what you're heating. For the sauces mentioned above, the advantage is ensuring that no part of the sauce will get above 212F, the temperature of the boiling water. Microwaving will be faster for most things though.
The advantage of this method (which sourd'oh properly identified as a double boiler) is that it
It is used for the sauces sourd'oh mentioned not just because of the limiting effect, because this would be too hot for most foods with which it is used. It is used because certain foods have to be worked in a certain temperature range. Egg yolks start binding at maybe 50 celsius, and are overcooked at 83-ish. You can't beat a hollandaise on the counter. But put it in a pan on the hob, and the part on the bottom will overheat. So the double boiler is much better. Besides, you want a round bowl for proper beating, and heating a round bowl on a planar hob is a pain.
Every time you have to stir/beat something while heated, the double boiler not only has an advantage over the microwave, you cannot even use the microwave for that.
The advantage of the microwave above the double boiler is, in turn, its speed. If you want to heat stuff which doesn't react badly to quick heating and doesn't have to be stirred or beaten, it is less fuss and more speed.
But if you have a reasonably quick hob, the sole advantage of the microwave above it is that you can heat stuff in the container you want to use for serving. For example, you can heat a porcelain mug of milk in the microwave, while you have to use a metal pan for the hob and refill the milk, giving you one more item to wash. However, the milk from the microwave will have hot and cold zones (happens to me always, even though the mw's I used had a turntable), while the hob heated milk will be more evenly heated. Conclusion: a hob plus a dishwasher reduce the advantages of a microwave to zero, while the double boiler is a niche tool which can never be replaced by a microwave.
