We tried cloth. At first it was great. It wasn't as much work as I thought it would be...I had a wet bag to keep the soiled ones in, and just had to do an extra rinse or two. But then my LO kept getting a rash, and nothing I tried (other than putting her in a disposable for a day) would get rid of it. I tried everything the sales reps told me to do - I used the detergent they suggested (plus a few others), the amount they suggested, I did more rinses, I "stripped" them, but nothing would stop the damn rash! So I finally gave up and went back to disposables (after about 3 months of trying). I was sad about it though, and will try it again on the next baby.
I know a few other cloth diapering moms and it seems some of them had no problems whatsoever, and some had a really hard time finding the right washing system before the rashes stopped.
But after all that, I would still recommend trying it if you want to. It was great before the rashes started (lol). They have some really cute prints, and it's definitely easier than you would think. Plus, I never had a single leak with them, which was great.
I have heard that they don't work so well on newborns though, but I didn't try that myself (I bought my cloth when LO was 3 months old).
To answer your last question, I bought my "stash" of cloth...I looked into the cost of diaper services and found them to be really expensive!
Disposables are definitely easier and more convenient...but there's definitely pros and cons to both cloth and disposables.