It depends. When it comes to music, I'm all digital. It's easier to just have it all stored on a computer than to have a disc. Plus, if your hard drive goes bad, you just have to redownload it once you solve that problem. If you lose a disc, you're out of luck and have to buy a new one.
When it comes to movies and games (minus PC games), I usually go physical. High Definition movies and games are usually above 4GB, and with my internet speed, it's just easier to purchase a physical copy. It would take me upwards of 10 hours to download an 8GB game, and when I want to buy a game, I want to buy and play. Not buy and wait. However, with the new feature in the next-gen consoles where you can play as you download, I might just go all digital on everything.