Personally, I like purchasing a retail version because it feels like you get more for what you paid for and that feeling makes you feel good. Plus I trust retail CD's more because they are for sure going to work 99.9% of the time, digital distribution is only good if the game is for sure going to work on the client side. Due to the fact that some games downloaded from Steam don't work properly and support from Steam is extremely poor. Makes the retail version what I like to call "Tried and true"
Edit (added additional thoughts):
However, Steam is good if the developer does it right. For example I purchased "The Orange Box" Retail Version and it only needs the disc to install the game files but for everything else it's Steam. So we still get a physical box and media, but with the advantage of having a digital copy from here forever.
Also, what if we go with a more friendly win-win situation for the customers. Blu Ray movies now a days, come with a physical retail disk and a free digital copy. Both can be stand alone, but registered to one special key. I know it's a more complicated system but sometimes if the alternatives are not good, reinvent it.
Link to the movie idea: http://crave.cnet.co.uk/homecinema/0,39029...49300145,00.htm