Noisy-Le-Grand leader Lars Murray explains why MP3s and CDs aren't an either/or proposition:

Vitals

Tech:
MP3-enabled portable CD-player
5-disc MP3-enabled DVD changer
25-disc CD changer (not MP3-Compatible)
Rio 500 (Busted serial connection)
Speakeasy DSL at home, T1 at work
Limewire Pro (RIP Audiogalaxy)
Cassette tapes (20-year library of mix tapes)

Caveats: I like hassle-free stuff. I am also not a first-wave adopter, as most first wave products are unreliable and are overpriced. I do not collect DVDs; I subscribe to Netflix (the greatest thing since sliced bread, or maybe Napster). I rarely buy any music based on radio play. I sometimes see stuff on TV, but mostly I buy based on press, borrowing from friends, and online previewing.

Why I still buy CDs:

1) The sound quality is uniform
2) They are reliable (burned audio and MP3 CDS still don't always work
in all my devices)
3) I like collecting them
4) I like supporting bands (regardless of your view of label practices, Soundscan numbers help a band)
5) I can rip songs from them for compilations and MP3 players
6) I can rip them for traveling and leave the original at home
7) I like to have the artwork
8) They are manageable

What is not so good about about CDs:

1) At 17.99 list, they are overpriced relative to DVDs
2) They relatively bulky; a pain to travel with.
3) I cannot legally buy a decent compilation in many genres
4) I am reluctant to risk $14+ on a CD if I have not previewed it and like at least three tracks
5) A lot of stuff I want is not in print.

What is good about MP3 sharing and ripping:

1) Purchases made in the last couple of months (some new albums, some I had never paid attention to) that would not have happened without P2P
Dusty Springfield
The Vines
Lee "Scratch" Perry
Ash
Andrew WK
Buck Owens
Waylon Jennings
Guided By Voices

Artists previewed but not yet purchased, in all but one case because the original albums are not available, or the available compilations omit important tracks:
Faron Young
Porter Wagoner
Gerry And the Pacemakers
The Adverts
Ian Dury
Flying Lizards
Luna

Artists whose stuff I have not been able to find and preview through P2P, (and who should maybe wish I could) suggesting that indies are neither hurt nor helped.
Interpol
Melomane
Josh Rouse
Viva Satellite
LES Stitches
Noisy-Le-Grand ;-)

2) Compilations that I have made with tracks acquired through P2P in the last month, in all cases mixed with material from CDs I own
Summer 2002 mix
British Invasion
Pub Rock
London 1981

3) Artists easier to find online than in stores: Virtually all of the above.

4) I can carry a ton of music with me when I travel, if I want to hassle with building playlists.

MP3 Disadvantages

1) Wildly inconsistent sound quality and levels
2) Lacking an IPOD, filing and playing back from a huge MP3 library is a pain, especially in the car.
3) Obscure stuff is difficult to find
4) Filenames are all over the place
5) Every P2P program ever has severely impeded my computer's speed and function. I don't even know why and I don't have the time to explore.
6) Gnutella downloads would fail any reliability test
7) I still use the old Adaptec software, and I'm too cheap to upgrade, so my burned CDs do not have CDDB info. Thus burning is a pain, and slow.

Bottom line, free ain't everything. It's probably irrational to keep buying CDs, but entertainment isn't rational. In fact, when it becomes rational, the market is probably not delivering the correct value proposition.

I freely admit up to this moment I have had no motivation to use MP3s whatsoever. My situation is fairly unusual I'm sure: because I am a music writer and radio programmer/DJ I get about 30-40 CDs a week and there's no way I can get through those let alone go rooting around the Internet for more.