We decided to use cloth diapers for a couple reasons.
1. They are actually quite cost-effective. The initial start up cost for us was about $600, which seems a little steep, but in essence that is all we've had to invest. The average cost per child for disposables is approximately $2000. So if you plan to have more than one child, it is even more cost effective because you can use cloth on a second, third, fourth (however many you plan to have!). We also haven't seen a significant increase in hydro costs either.
2. They are a healthy option for our child. His skin is not constantly exposed to the chemicals that have been used to create disposable diapers. Cloth breathes better, which means less diaper rash and less severe diaper rash. They also feel a lot more comfy.
3. They are a good choice environmentally. Disposable diapers are the "3rd largest single product in the waste stream". The pollution that is created in producing disposables alone is astounding. Check out this link for more info on the environmental impact of disposables.
We are using "Mother-Ease" cloth diapers. They are made in Ontario, and we are extremely happy with them thus far. If you are considering cloth, definitely keep them in mind as an option!