I started off hosting remotely, but my extremely cheep hosting plan limited my CPU time excessively. Since I was behind a NAT, I had to do some proxying tricks through my provider to serve from my home computer:

http://programming.reddit.com/info/1e1a7/comments/c1e4ka

That certainly worked well. Now that I have more money to burn and a big site nearing launch though, I will definitely be trying out some dedicated hosting.

Basically the answer is: depends how broke you are.