I've done both and find benefits to each. A lot of it depends on how knowledgeable I am about an area, how much time I have to spend researching, and how much money I have.
For foreign travel, I often prefer a travel agent if I have particular needs. However, I work specifically with a fee-based agent who I met when she was just starting out. $25 flat fee per person at that time, but now that she has more experience she charges $50 flat fee.
For example, I had an event in Amsterdam and asked specifically for hotels in certain price ranges and certain general locations, but found myself generally challenged at finding what I needed online.
She found me a hotel that was in the city center for a reasonable price, then a fun touristy hotel I asked to stay at for a night (which does not do internet reservations), and then she found me a hotel a couple blocks from my event for the nights I needed it. Airfare was lowest available, and she hooked me up with tons of information about local customs, emergency numbers, a waterproof map, etc.
I've booked several trips through her since she always takes care of me.
On the flip-side, I've also planned many domestic trips (and some foreign) on my own and typically use Travelocity/Expedia to find the lowest offers, then go directly to the airline/hotel/transportation to purchase.
Earlier last year I went to Prague. Airfare was covered because I was there for a competition, but I needed to cover expenses. So I went on Craigslist.org and found a local (Roman was his name) who rents out rooms/apartments/etc. I ended up with the spare bedroom of a couple's (non-English speaking) apartment that was larger than most hotel rooms.
Roman met me at their place, let me use their internet, gave me a map and directions to anywhere I needed to go (including which metro / bus stops and key landmarks), recommended local restaurants that didn't gauge tourists and had excellent food, and also helped me understand any local customs that would be of use to me.
Also, because I fly to Japan a few times a year for my job and I have AA Platinum status (so I get double the miles), I first try to see if I can get somewhere on AA miles or use AA miles for the hotel before looking elsewhere.
All in all, I think that choosing self-booking vs. a travel agent depends a lot on your needs, time, and how important it is for you to know the local scene. Not to mention, it also should be based on the kind of experience you want to have.
I've booked some trips where all I had was a plane ticket, a Eurail pass, and a book of hostels. I didn't know where I'd stay from night to night, or necessarily even what country I'd be in. That was my first trip so I used my fee-based travel agent since I didn't know any difference... and for the $50 ($25 for me) she charged was well worth it at the time, since she hooked me up with tons of information for all the countries we were thinking of visiting, along with the customs, directions, etc.