Currently, there are a lot of people espousing going the self-publishing route when it comes to eBooks, citing authors like J.A. Konrath. Do I recommend such advice? Well, there will always be qualifications and here are some considerations that some people omit or aren't explicit.
Every Person is Wired Differently
The first thing to consider is who you are. For example, when it comes to the writing process, different authors have different techniques. Some writers use outlines. Others do not. Some write in chronological order. Others write the scenes they enjoy the most first. There is no universal, objective answer to such questions. One technique might work for one author while it may not for another. The best advice here is to experiment and discover what works for you.
That's also the case with self-publishing. Some writers are optimized exclusively for writing (or don't have the time to pursue anything else). Others might be good at the other elements involved in publishing. Do you know who the ideal author self-publishers are? The ones who are in love with the entire publishing process, from book cover to editing to marketing to production to finances. You might be obsessive-compulsive when it comes to these details. With self-publishing, you have all this freedom--and responsibility. Honestly, some writers are ill-suited for self-publishing. Others, on the other hand, might be encouraged by this route and improve their writing and/or finances. Because a lot of people subscribe to the theory of specialization (i.e. you can only be good at one thing), the former is probably more common than the latter. But who knows, it's possible that you might be one of the latter. However, be aware of the other considerations (see below).
Now you don't have to be a great writer to be a best-seller, if that is your goal (life's not fair, deal with it). However, there is a bare minimum of quality that is required. Even the most horribly-written (based on each reader's subjectivity of course) best-seller is, at the very least, competent. Self-publishing is usually frowned upon because a lot of unpublished writers don't even have the sense to write competent fiction. What do I mean by competence? Basic things like grammar, spelling, structure, etc. While it's easy to claim that other people don't have this level of skill, a lot of us don't have the same "objective" assessment when it comes to our own writing. Traditional publishing plays it safe (and to a certain extent, determine whether your writing is worth the investment or not) by having gatekeepers and editors.
Now let's assume you're not the kind of writer mentioned above. Let's say you are a talented writer who has produced fiction that is of some quality. Well, then you'll usually fall in one of two camps. The first camp are the writers who actually want to improve. It might be polishing the existing manuscript. Or making significant edits with their work. What you want is either time (time which can be devoted to other duties) or an editor(s). There are different kinds of editors (Terri Windling has a breakdown here on some of them) and you don't have immediate access to them a self-published author. It's not just about paying for an editor, but finding the contacts and finding the right editor for you. With traditional publishing, not only does the publisher pay for that service, but they have a stable of editors who theoretically have a track record. It's also very much possible that you're the type of writer who doesn't need any sort of editing. I'll be blunt: that's usually the exception rather than the norm (which isn't to say that you're not that type of writer but self-delusion is easy to come by in the publishing industry).
The other type of writer is one who is satisfied with their current level of writing and simply want to focus on getting their book out. See below.
For me, book design can be broken down into two parts. One is the cover. Unless you're a graphic artist, illustrator, or have raw talent, you'll most likely want to outsource your cover. (It's still possible to come up with a horrible cover and sell a lot but it's not a practice I encourage.)
The second is book layout. If this were a print book, my recommendation would be similar to the first. But the good news about two of the popular eBook formats right now--ePub and Kindle--is that you don't need to have good design sense to create a competent layout (I elaborate on that here). As a self-publisher, this is one of the things you can teach yourself and what I consider "trainable". It'll take some time to educate yourself, depending on how web-savvy you are, but as long as you're not an absolute luddite (or an idiot), I'd say you can teach yourself within a week or two of how to layout eBooks. That's the good news. The bad news is that while it takes a relatively short time to teach yourself how to layout in ePub/Kindle, it usually takes a lot of time and effort to produce a competent (see Lou Ander's experience) layout, especially novel-length books. This can be partially mitigated by software but I do not recommend being solely reliant on software (as opposed to code).
Now marketing and publicity are really two different but related industries. The question is whether you want to outsource these, or take them upon yourself (at which point, the distinction can be moot). Before you choose the latter, if you are planning to interact with your readers, you must first determine whether you have a sociable personality. There are honestly some authors who should never be on Twitter or Facebook or responding to comments. Others are a more than welcome addition to the community. If you're the former, either outsource publicity, or you might want to simply stick with a traditional publisher. If you're the latter, prepare to dedicate a lot of time to this aspect of the business (which honestly can be rewarding as you get to interact with your readers).
Employees vs. Entrepreneurs
If you are going to be a self-publisher, you need to have an entrepreneurial mentality. What do I mean by that? Well, employees are paid on a timely basis (i.e. once a month) and freelancers a lump sum (usually a 50/50 split before and after the work is done). Authors with a traditional publisher is some combination of those two: they are given an advance (lump sum) and then hopefully, every year or so (assuming their book is successful), receive royalties. It's mostly a "fire-and-forget" experience: write manuscript, submit manuscript, get paid.
Self-publishers, on the other hand, are like entrepreneurs. While authors do spend some money during the publishing process (i.e. printing copies for their agents and publisher), it is a paltry sum compared to what a self-publisher will spend. The good news is that eBook self-publishing (as opposed to print) has lowered costs significantly. You don't need to pay for distribution for example (or at least it's not in addition to what you're paying the retailer). Or for printing the actual book. But there are other costs such as ISBNs and freelancers (book designer, cover artist, editors, publicists, etc.) you might employ. You can mitigate some of these costs by doing them yourself, but bear in mind that a) you have finite time and b) you may not actually be good in that specific field.
So aside from spending money, also don't expect to recoup your investment immediately. eBook payment terms are relatively quick (compared to traditional publishing), especially if you're a self-publisher, but unless you sell a hundred thousand books in your first month, you won't get a fat paycheck initially (see payment terms of your retailer on how soon you can expect to get paid). A return on your investment won't happen until later on (which can be anywhere to months or years, depending on your success). If your book is a success (i.e. recoups your costs), congratulations. You can expect a better payoff in the long-run compared to signing with a traditional publisher. If your book tanks, well, no one is going to give you your money back.
The good thing about being a self-publisher however is that you can make decisions and changes immediately. You can set the price of your book. Make it available in certain countries. Market it the way you want. You have mobility that you wouldn't otherwise have. But you'll also be working the entire year, not necessarily eight hours a day. You 'll want to monitor sales, make sure there's no problem in the production chain (i.e. your retailer suddenly stops selling your books), address your customer's needs, etc.
Now neither paradigm--employee vs. entrepreneur--is superior. Some prefer the former, as the diminished risk is well worth the diminished rewards. If you're a starving writer for example, I don't think you'd want to go the self-publishing route (but there are exceptions, such as with Catherynne M. Valente and the initial release of The Girl Who Circumnavigated Fairyland in a Ship of Her Own Making). There is also the question of valuing your time (it's not necessarily time that goes into your writing, but time that could be spent with friends and relatives). Being a self-publisher is more demanding on time (depending on how much work you delegate to others) although it's significantly less when it comes to eBooks (as opposed to print).
Now there are other details in self-publishing that I haven't mentioned, but these are the broad strokes. If you're intimidated by all this, then self-publishing is probably not for you. If you're encouraged by this, you might want to give it a shot (which isn't to say you're suited for it). Cory Doctorow for example has posted his experiences self-publishing With A Little Help (although this is both for print and eBooks).
Self-publishing can be rewarding, financially and/or emotionally, but it is also demanding of time and talent (if not money). Whether one outweights the other varies from person to person.
I have self-published electronically (just look at The Philippine Speculative Fiction Sampler and The Best of Philippine Speculative Fiction 2009) and I've had fiction published by traditional publishers. Each experience is different and has its own rewards although for me, I tend to avoid the former unless it's absolutely necessary. (For example, as an author, I have to keep track of a) my manuscript, b) contracts, c) revisions to proofs, d) updating my author bio and bibliography, e) payments, and f) taxes; how much more will be on my plate as a self-publisher?)