PhotoPass is a service where Disney photographers throughout the parks will take your photo free of charge. When they take your photo, they will hand you a small card. This is your PhotoPass card, don't lose it. The next time you want your picture taken, just hand the card to the next photographer and he or she will add the new photos to your same card. (Or you can just keep accumulating new cards, but I find that if I do this I end up losing some of my photos.) There is a detailed explanation of the PhotoPass service at www.stitchkingdom.com/photopass.
To me, the main advantage of using PhotoPass is that I actually get to be in some of my family photos. Otherwise I am always the one behind the camera and there's no evidence that I was actually on the trip with my children.
While getting your photo taken by a PhotoPass photographer is free. Actually getting the photos can be expensive. If you go to the official PhotoPass website
www.disneyphotopass.com, you can see current pricing. (You may need to register for the site, but this only takes a moment and you'll need to do it anyway if you're going to use the service.) Prices do change, so just use the prices I'm about to give as a guide. As of January 2008, the price for a single 5x7 photo was $12.95. You can sometimes find promotions or coupons; nevertheless, you can see that at this can add up quickly. The photo CD is currently listed for $124.95 and, as you noted, there are ways to find discounts. The CD will hold many photos (I don't know the exact number, but I'm sure it is in excess of 100). Plus, with the CD you are also buying the reproduction rights to your photos, so you can print them yourself or have them made into Christmas cards much more cheaply than having Disney print them. So, this was a very long answer to your question ... Yes, if you think you'll want to print more than about 10 of your Disney PhotoPass pictures, then the PhotoPass CD is a great bargain.