We oscillate between cable and DVDs in our household.
I have a large TV DVD collection (all of TOS, B5, BSG (new), Dark Angel, Buffy, Angel, Charmed (that's the wife's

) Monk, The 4400, Avatar, The Animated Series of Batman, Batman Beyond, Superman and Justice League and many more) We watch alot of them because there is often nothing interesting on regular TV.
I have two rules - 1)It cannot be on basically everyday, so I don't buy Seinfeld, Simpsons, etc (though if we go without cable again, I might pick up a couple). 2)It has to be something I'm looking for/thinking about on TV (for example, geez, there is nothing on why don't they have Arrested Development on), hence no Gilligan's Island or King of Queens
I find I watch the self contained stuff a bit more (TOS, Monk, Batman) because watching BSG or Angel there is a longer story arc. Having said that, the few times we have gone without cable we would watch a whole series in a few weeks.
I also really really really love the lack of commercials, and the lack of those freakin' annoying popup things in the bottom of the screen annoucing other shows - those seem to get bigger and bigger and last longer every week!!
And Mr. Tweedy is right, when we were cableless, we would treat ourselves to a box set (or two) a month to grow our collection and keep it fresh. It's how the collection got so big in the first place.
I do also have friends who do the netflix thing, and they like it alot. I'm not sure why we don't, other than we do have a few staples (TOS, Charmed, Buffy) that we throw in when we just want some background noise.
Movies is a different beast - we have quite a few, but few that we've watched more than once. I think the time commitment is too much, and other than a few smash favs (Galaxy Quest, Matrix, Star Wars), most aren't good enough to watch the whole thing. I do have some that I have bought real cheap, to watch key parts - for example the opening sequence of Gladiator - I've seen it enough times that it is worth the 12 bucks I paid for it.