Over on the Purchasing DVC forum, somebody had posted a great thread I can't find atm, but it had a list of features of people for whom DVC works great for.
The main ones were:
1. Do you travel to a Disney park every year or every other year anyways? If not, don't get DVC as it isn't a good value to use elsewhere. And it will make you Disney even more.
2. Can you book 7-11 months in advance, and stick to that or be happy with any resort as a backup? Resorts book up and if you're a last-minute traveller it can be very difficult to use your points.
3. Can you afford to purchase the initial points without [too much] financing (there's debates on this, I'm for no financing personally) and afford maintenance fees every year? (And tickets, food, etc?)
4. Do you mind a lack of housekeeping, would you use a full kitchen and washer/dryer? Or would that make you feel like you're not really on vacation?
We

our DVC, bought it up front with the $$ we'd been planning on spending on a fancy wedding. Had previously gone to DLR every year, staying in motels across the street for about $1K/year and now we get a villa at the Grand for about the same amount (MF's + pro-rated buy in). Spending about the same for a serious upgrade and the flexibility to eat in our villas and invite friends along if we want has been bliss for us. My mom already had bought a timeshare years ago at the resort where we ski every year so we knew we loved having the kitchen and washer/dryer and didn't mind the lack of housekeeping on vacation.
DVC isn't right for everybody, but if you can afford it, fit most of the above criteria, and want to go from a Value to a Villa, its a great luxury. The basics are that you purchase points, pick a time you want to go, then use those points for nights to stay in a Villa instead of a hotel ... you can buy points direct, which is very expensive, or through resale. If you're seriously thinking about buying head over to the Purchasing DVC forum, and definitely take a look at resale as it will save you thousands on the purchase of the points. And the Timeshare Store guys are probably more helpful than a DVC guide anyways. Ha!