A couple weeks back I posted Employee or 1099 and now that my friend Wes Dumey has posted his last installment, I wanted to add my thoughts. I guess a good place to start is that Wes really did a good job describing the options and in particular I thought made a good case for why independent contractor is a good fit for some, but not all. I'd really recommend reading all three of his posts before bothering with my comments!
One big difference that most people see between the two is that as an employee 'they don't have to worry about the next paycheck'. To be fair no one wants to live in fear of not paying the bills regardless of employment status. But I think contractors have a more realistic view of the world because they know they have to work to get paid, and have to continue to provide value if they want to stay employeed. The same isn't necessarily true of salaried employees, but it should be - and that's where companies start to go downhill. Think about it, if you're in corporate IT do you really think about whether the company is getting full value for your time? Imagine that tomorrow they converted everyone to contractor status tomorrow - would the way you work change? I suspect it would! This isn't to say employees are lazy, or otherwise less valuable than contractors, just that they can easily become complacent.
The hardest part of being a contractor is learning the marketing side. To some degree there's a formula to follow (search my blog for notes on that), but most of us tend towards the introverted and marketing is a struggle. If you don't want to market your skills actively, you're stuck with being an employee, or joining a firm that will send you work and take a percentage, but offer no benefits (either the best of both or the worst of both depending on your view!).
Having been on both sides of the fence at various times I'll say that I prefer to play on a team rather than just guest star. There's a lot of fun/value that comes with working with a top notch team, and it's just hard to achieve that if you're there on an interim basis. It's intangible, and depending on your goals may not matter, but it's worth thinking about it.