I was reading up on the special abilities last night, and stumbled across the description for the Breath ability, which reads thus:

"Attacks with the Breath ability use the Breath template to determine which spaces they affect. The template is palced against one side of the attacking figure and all figures underneath the template (friendly and enemy) are affected by the attack. A Breath attack ignores rolled range, only missing on a miss result. If the attack does not miss, it deals full damage to each figure affected by it. If a Breath attack is dodged by more than one figure, only one re-roll may be made."

My question is: is there any limitation on how often the Breath ability can be used? Or is it a part of the creature's normal attack that gets used every round?

It is the attack the creature makes every round. Cave, the area of the attack affect all creatures within, hostile and friendly.

SC

Note that per the FAQ you can choose not to use breath, in which case you make a normal attack against a single square.

James McMurray said:

+1.

IIRC, this ruling was introduced to plug the loophole where a hero with Grapple gets diagonally adjacent to a dragon or a hell hound, and the monster is then unable to hit the hero with a breath attack. (In case the OP was wondering.)

There's no limit on how many attacks a creature with Breath can make using the Breath template - if you use Rage on a dragon it can make two template attacks in one round. However, the option to make a normal, single-square attack without the template (but using all other abilities normally) does exist if you want it for some reason.