Citrus vodka is straight vodka with citrus flavoring. The flavoring is usually added after distillation. Unfortunately, mediocre vodka is often used in citrus or other flavored vodkas. The reason is because they can get away with it. The flavoring covers up the vodka's flaws. This is why I'm usually hesitant to try citrus vodkas or use them in cocktails in place of straight vodka.
There are some exceptions where the producer will use a quality vodka and natural flavors. But what you really want to seek out are the vodkas that are distilled with the flavorings the same way English gins are made. In this case the flavor compounds travel up the still with the alcohol vapor resulting in very fresh though subtle citrus flavors.
One example of this kind of citrus vodka is North Shore Distillery's Sol Chamomile Citrus vodka. Here the flavorings are steeped in the spirit before the final distillation.
The Big Kahuna in this spirit category is Absolut Citron. Introduced in 1988, Citron quickly grew to dominate the citrus vodka category. Absolut Citron is made from a wheat-based vodka to which all natural ingredients are added after distillation (they claim no added sugar).
With the huge popularity of citrus vodka also comes an abundance of cocktails that use this ingredient. Probably at the top of the list is the Cosmopolitan.
If you are disappointed with your citrus vodka in your cocktails or you get stuck with a crappy brand, there is a great substitute. Use a quality straight vodka instead and squeeze a large lemon peel into the shaker tin or mixing glass. You will get the smoothness and character of a good vodka and the absolutely refreshing lemon oil as well.
It is easy to make your own citrus vodka. Just macerate (steep at room temperature) citrus peel in straight vodka. You want to use only the colored outside part of the peel, not the white pith. Use lemon, lime, orange, or grapefruit peel or any combination ot them.
Macerate for at least a week in a glass bottle. You can go a lot longer if you wish. Once the vodka tastes the way you like, remove the peel and you're good to go.
Let us know how your homemade vodka turns out.