From my perspective (CFW PS3, yar harr) I really prefer Digital copies.
I mean, I do like physical to an extent, but one thing that really annoys me is when optical drive lasers start to die. A hard drive can usually outlive an optical drive, especially if the hard drive is solid state. I do pirate a lot of games, but I pay for the ones that I think deserve my money. Examples being Ni no Kuni, Metal Gear Rising, Borderlands and Borderlands 2, I usually buy every armored core game...
I do like the bonuses that some physical copies can have, like collectors/limited editions... hoping the lamp that comes with my MGR LE is worth it.
But usually I prefer a digital back-up or copy because, like I already said, they're not as easy to kill as optical drives are.
With digital I can keep a backup package or folder on another hard drive/storage medium in the eventuality that my PS3's hard drive dies. I realize normal users do not have this option, but that is something that should be provided by a company wishing to go digital... Steam lets you do this in a way, letting you backup your steamapps folder at will.
With PSN, at least you can redownload any digitally purchased titles, But your normal end user wouldn't want to waste the time doing that if they didn't have to. I suppose there's always the backup option in the system menu though. I also really love the idea of having all my games in one place, not needing to constantly move discs around, only needing to keep track of my hard drive...
It's double-edged as while I don't have to worry about my hard drive getting scratched up from some irresponsible child playing with it, said child could easily take my hard drive and throw it in a tub if they didn't like me playing games, or didn't like my games.
However that's where the backup medium comes in. With physical, you don't really have the option of keeping backups unless you're not a normal user. Publishers/sony/MS/etc go through all this trouble to make sure you can't back up the games for their system, and all that ends up doing is hurt the end user, if they lose the disc or it gets too scratched up to read, or the optical drive dies...