Several months ago, my wife and I gave up cable television and became cord cutters, as it is commonly called. There was a period of many months when our television was located on the opposite side of our baby's crib and it hardly got any use. When we finally did move our television to a more sane location, we found that the frequency at which we were watching cable TV shows was just too low to justify the cost.
Our new setup is simple. It's a TV with an Apple TV plugged into it. On the Apple TV we primarily use Netflix and Hulu Plus. If there is a TV show that's not on Hulu Plus that we want to see as it's released, we buy a season pass on iTunes. You can buy 3-4 season passes on iTunes for the price of a single month of cable. Also, when you buy a season pass on iTunes you're paying for a year, as opposed to paying every month. You also have the added benefit of owning the show so you can rewatch it as much as you want.
The one thing people always ask when I tell them I'm a cord cutter is, "but what about live events?" The ultimate test of this was election night. We wanted to follow the results pour in live like we usually did. What we found out was that there were several news channels that were streaming their live election coverage to YouTube. After trying several streams, including ones that required being AirPlayed from apps, we settled on watching the NBC stream.
AirPlay adds a lot of flexibility and options for content that is not obviously accessible from the Apple TV. You can stream content from iPhone/iPad apps like Amazon Instant Video, Crackle, and TED. You can also AirPlay mirror a laptop, or any other computer for that matter, and add any content viewable from the web including Hulu's "Web Only" content like the Simpsons.
There are a lot of options for cord cutters and there are more being added every day. It costs less and frees up some funds for buying content from sources like iTunes and Amazon. The only downside to all of these options is that you have to do some hunting because of complex licensing deals. Nintendo TVii is an attempt to simplify this by combining all of these sources into a single listing, but we do not yet have a Wii U, so I cannot speak to its implementation.