As you said, park admission must be purchased separately.
DVC members use all types - it depends on what their park touring plans may be for a particular trip.
There are many, many members (us included) who buy either annual or premium annual passes. Then we schedule our trips to get at least two trips out of the pass. For example, this year we am going 12/5 - 12/12. Next year we will probably go 11/28 - 12/5. The trips are about a year apart, but we will get two trips out of a single annual pass, so that is the most economical deal for us.
DVC offers a 10% discount on the UPH pass (formerly known as the length of stay pass). This is the same pass the other resorts offer. Again, depending on your plans, this could be a good value for you.
We've also purchased and used hopper passes of various length. If we're not planning to go to a park all days of our stay, these passes work well - they don't expire and we can use the same pass for more than one trip.
Do check the list of discounts that you receive at check in (or visit the members' website for a current list). DVC presently offers many discounts (they can and do change, though), including admission discounts to the water parks, mini-golf and Pleasure Island.
Enjoy your membership!