[prd,twocolumn,groupedaddress,showpacs,floatfix, nofootinbib]We describe an optical simulation program that models a complete, coupled-cavity interferometer like those used by the Laser Interferometer Gravitational-Wave Observatory (LIGO) Project. A wide variety of interferometer deformations can be modeled, including general surface roughness and substrate inhomogeneities, with no a priori symmetry assumptions about the nature of interferometer imperfections. Several important interferometer parameters are optimized automatically to achieve the best possible sensitivity for each new set of perturbed mirrors. The simulation output data set includes the circulating powers and electric fields at various points in the interferometer, both for the main carrier beam and for its signal-sideband auxiliary beams, allowing an explicit calculation of the shot-noise-limited gravitational-wave sensitivity of the interferometric detector to be performed. Here we present an overview of the physics simulated by the program, and demonstrate its use with a series of runs showing the degradation of LIGO performance caused by realistically-deformed mirror profiles. We then estimate the effect of this performance degradation upon the detectability of astrophysical sources of gravitational waves. We conclude by describing applications of the simulation program to LIGO research and development efforts.