I've done both, and I'm currently in the office phase…
When we started our business, we rented a 3 bedroom house which doubled as our office – we started out working in the lounge, but each of us moved to his bedroom to ensure more concentrated effort.
The benefits of working at home are great, but as we started to grow into a business which became more and more professional, with the increasing need to see clients and industry partners, we had to move into office space. I've done a serious bit of thinking on the pros and cons, but I won't clog up your comments too much 🙂
Principally, I think it depends on the kind of work you do. For a software developer, I think home is actually better than an office, but for someone like a CRM implementation expert, it just doesn't cut it.
That being said, I really miss being able to get in front of my machine at 11pm if inspiration strikes!