I just want to post a link to Writer Beware's page on print-on-demand services. In general, if you are hoping to get published, you should acquaint yourself with Writer Beware and the Absolute Write Water Cooler forum, because there are a LOT of scams out there. (The worst was when I had to explain to some lady that the writing "award" her daughter won was actually a pretty common scam. That was just awful, even though they wisely hadn't paid the scammers any money, because she was so proud of her daughter.*) I mean, yes, I am self-publishing and producing a print-on-demand book, but you'll notice that it's been quite a bit of work. I'm also (and this is key) not expecting to make any money off it. Seriously. I mean, it'll be nice if I do, but I'm not in any sense betting the farm on it. I also don't mind if I alienate traditional publishing houses by producing a POD book--I'm pretty much fed up with that world, and I'm in a position now where I don't have to care.
But while I don't have to make money on my books, I also don't want to lose a lot of money, and I really don't want to get ripped off. So I have done my homework regarding things like rights, and of course a major part of the appeal of Amazon for me is the fact that it includes a distribution channel. I also am willing and (more or less) able to do things like the layout, which has brought my costs down to the price of Adobe Acrobat (and I know there are cheaper PDF converters and editors out there, I'm just not technically adept enough to figure them out). The main costs for me have been 1. my totally optional Web site, and 2. my time.
Another, not-insignificant reason for me to do it myself is because there are a host of people out there looking to take advantage of would-be writers. I've seen enough to not trust the people who say, Hey, gimme a big wad o' cash, and I'll turn YOUR book into a STAR! The pitch may be, I pay you, and you'll do the art. But will it be good art? Or are you relying on me being a rube who doesn't know the first thing about how a book ought to look? Let's just say that I've seen enough crappy expensive professional layouts that I feel OK if mine is crappy but free. (Of course it's worth it to pay for what you know will be good quality--I was more than willing to pay 11th Hour to do my cover art, but alas the talented artists tend to be really busy.)
As much as the scams/bad values are an issue with art, they're an even bigger issue with editorial. Editorial services are basically a rip off--even if the person improves your writing greatly, they cannot possibly guarantee publication, and given the rates they charge.... I mean, for Christ's sake, my super-duper, fanciest-of-the-fancy-pants, his-client-list-would-BLIND-you agent couldn't get my nonfiction book published. Someone who advertises in the back pages of Would-Be Writer's Monthly isn't going to do you any better.
I think it's totally worth it to work on your writing and become a better writer, and that's pretty hard to do if you're not on staff at a publication and constantly getting feedback from editors. But it is possible to do, and to do much more cheaply, by joining writer's groups, submitting your materials to workshops, taking writing classes, learning grammar, and even just reading and watching stories critically, with an eye to their structure and figuring out what works and what doesn't. And, you know, don't be an idiot--check out people's qualifications. If you're being asked to shell out for a workshop, find out who the hell is going to be looking your stuff over, and why the hell you should listen to them--don't just cough up hundreds or even thousands of dollars for editing services by Promises-Promises, Ltd.
*ETA: You know, what's really evil about this kind of thing is that, for all anyone knows, that lady's daughter is indeed a great writer, or could become one. If they aren't working in the industry and aren't surrounded by people who are very frank and know what they're talking about, writers don't get a lot of meaningful feedback or affirmation. So to receive this kind of affirmation, but then to discover that it is a fraud--well, it was pretty brutal for the mother (I knew it was going to be, but I felt like I had to tell her, because the alternative was to have people ripping her off every time she turned around). I'm sure if she passed the news along to her daughter, it was pretty damaging to her confidence as well. It was just an evil thing to do to them.