Digital media is growing, not only because more and more customers seem to want it, but because it gives the publisher of the game more money. For each sold digital copy they generally get about 70% of the price, while with physical media they only get about 40%.
On the negative side of things, digital media is more expensive for the customer. The comfort of being able to buy the media straight from the home apparently cost more than what it cost to print the manual, box and so on, and ship it. Not to mention there isn't really any competition between the online game stores while the physical stores keep having price wars against eachother. Just last week there was a Steam sale on Mass Effect 2, but it was still cheaper to just buy it from the normal price in the local game store.
I rather like digital media when it's free from DRM though, I bought Witcher 2 from GOG because of it. But I'm not fond of the concept of online activation at all, which Steamworks and others use.
How do you break your games?
I guess I have about 2000 discs (games, DVDs and CDs), and the only one that broken is the second disc for http://en.wikipedia.org/wiki/Escape_from_Monkey_Island. But that's because it had a tiny crack in it from the very beginning, which over time gotten larger and larger while in the drive, and now the disc is unusable. I don't really care that much though, it lasted long enough for me to play thru the game and it's not a particulary good game