Major version zero (0.y.z) is for initial development. Anything may change at any time. The public API should not be considered stable.
Version 1.0.0 defines the public API. The way in which the version number is incremented after this release is dependent on this public API and how it changes.
How should I deal with revisions in the 0.y.z initial development phase?
The simplest thing to do is start your initial development release at 0.1.0 and then increment the minor version for each subsequent release.
How do I know when to release 1.0.0?
If your software is being used in production, it should probably already be 1.0.0. If you have a stable API on which users have come to depend, you should be 1.0.0. If you're worrying a lot about backwards compatibility, you should probably already be 1.0.0.
Doesn't this discourage rapid development and fast iteration?
Major version zero is all about rapid development. If you're changing the API every day you should either still be in version 0.y.z or on a separate development branch working on the next major version.