Hi Joseph, the answer to your question is "it depends". Option that you have are : roll it over to another 401k plan if you are or willing to be employed by another company that has equal or verified and allowed plan to receive other qualified plan proceeds. Secondly, roll it over into an IRA held outside of the 401k (be aware of funds expenses and other sale fees imposed upon purchase). Keep it where it is now (not recommended due to limited scope of investment options and other expenses that are imposed) and also another option is roll it over into a ROTH IRA if the total amount of investment is small and wont effect your overall tax situation ( consult with your accountant before) so it can create another non -taxable distribution vehicle for your retirement. Is always good to have options when you retire due to fluctuation of taxes and other distribution planning. I do not recommend for you liquidating this account and incur 10% penalty plus taxes (assuming you are not 59 1/2 ) unless you really are in cash constraint and this is your last resort for financial well being. I hope this helps!
You can, but that would most likely be a big mistake. I need to know more about you to give you accurate advice.
I agree with Joseph, although you can does not mean you should. The easiest solution to get your 401k out of your old employers hands without getting pummeled with taxes is to open an IRA with a custodian like TD ameritrade or Charles Schwab and roll your 401k into your new IRA. This will continue to let the funds grow tax free until retirement while also getting it under your control.