I have been gaming for a long time. I have been involved in online PC gaming for a long time too. Something that I have been seeing more and more of lately (and it is becoming more and more readily available with real deal big commercial releases) is digital only game purchases. DLC add on content is nothing new to PC games, but I have noticed that over the last few years more and more real deal major retail release games are also available as digital only purchases. I was slow to hop on the bandwagon, but more and more I am finding that when this is an available option this is how I end up buying stuff (though I am really not totally converted yet). So far I have had nothing but good experiences doing this too.
Normally these major releases don't offer any appreciable price break (not for new games at least, for older games these can be a real steal with some unreal bargains on games you may or may not be able to find easily in stores). They may or may not offer you any bonus content. So why buy games this way?
Plain and simple it is easier and faster for me to swipe my finger across my fingerprint reader to log into PayPal or to type in a credit card number than it is to drive to a store that carries the game. I don't have to worry about the game being in stock. I don't have to call ahead to see if it's available. I can buy the game at 3:00 am (which since a lot of my free time is late at night/early in the morning shopping times are a factor). I don't have CDs or DVDs to lose or for the kids to break (and since I store my key codes in several places, including some on e-mail accounts I don't have to worry about those as much either). Most companies can probably track back purchaser information and help with reactivation of software in the event of losing some information (never tried but it seems plausible). Many games are available either DRM or free or with less restrictive DRM than a hard copy (although some are just a restrictive if not more so, so it goes both ways). They do sometimes, especially with games that aren't brand new, come in package deals, either with expansions or with related games. This happens with physical copies too, but I have noticed that over the last several years these types of sets are a lot less common then they were 10-15 years ago.
There are downsides though. With the exception of the DRM free or limited DRM content this is not as convenient for installation on multiple systems (which 5-8 years ago was a concern for me, but now though I have more than one system I really only game on one). If you don't keep your key codes and/or account info safe and available you could have a major inconvenience in the event of needing to reinstall. You don't get any of the "feelies" (on an unrelated note, does anyone reading this remember when that was actually a term used for the little props and goodies, like cloth maps, that some games came with?), physical manuals, reference cards or other stuff (sometimes that is a benefit too though, since I still have stacks of such items scattered all over from games that may or may not ever get played again). You may have a very lengthy download, even on broadband. Some services that offer games this way require a connection to their server to authenticate the game (this often allows for use on multiple systems, but at the cost of requiring an active internet connection and the company's servers being up, running and not overcrowded to allow you to play the game at all, even offline).
I first tried digital only with a fun little game I had enjoyed as a kid and found was still available through the original company as a digital only version (no copies had survived my childhood). I was pleased with the fact that I got keys to install the game on multiple systems along with the super-uber-mega-all-inclusive-deluxe version of the game. Next I tried it with an MMORPG. I then bought all the expansions for said MMORPG as well as additional paid DLC type stuff. I found it to be very convenient and totally painless. Then I started checking out services like Steam and GOG (which obviously GOG is for older games, but the concept still applies). So far I have been very happy with the experience all around.
All in all I don't foresee physical media game sales disappearing completely any time soon (either for me or for the industry on a whole), but I do see a further increase in the availability of digital only copies of games (especially on PC), and I for one am likely to be buying more and more of them.