I've had my tankless water heater for little under a year and I'm still in love. Though the installation was involved, the savings on my energy bill and convenience of unlimited hot water when we have visitors has been well worth it. Metaefficient has put together some information for those considering the benefits of going tankless. See more after the jump.
With tankless water heaters being 10% - 20% more efficient than MODERN tank heaters (the efficiency is much more than older tank heaters) and water heating accounting for 20% - 25% of the average household's energy use, the price difference can be offset with just 13 years of use (according to the U.S. Department of Energy Web site).
The two options:
Gas-powered tankless water heaters are the most efficient, but are the most difficult to install and require venting.
Electric tankless water heaters are somewhat more efficient than tank electric heaters (about 8% more efficient), but are generally less efficient than gas-heated tank water heaters.
See MetaEfficient for a roundup of things to consider.