I've worked from home for a few years now and from a productivity standpoint its wonderful. For me at least, the ability to work from my desk, sitting in my chair, with my lightning, with only distractions that I create (such as music), all while avoiding any time-wasting commute is huge for my ability to focus and get stuff done.

Despite productivity benefits, the major drawback of working remotely is a lack of social interaction beyond telephone/e-mail/im, which can be very taxing emotionally because physical cues are hugely important to communication.