Digital yearbooks are cool for a few reasons: they're cheap, they're interactive and they can be used as a fundraiser.
Obviously producing a DVD or CD yearbook is cheaper than producing a printed yearbook. All you have to do is buy the software or software license and then burn copies of your yearbooks for all of your students/faculty.
Printed yearbooks will always have a place for some people, but personally I think that today's students are more interested in something that they can interact with. Digital yearbooks are a multimedia experience; most of them allow for a combination of text, images and music that can be viewed in a non-linear way. Kids want to be entertained and I think that digital yearbooks do a better job of entertaining them than printed yearbooks.
As a fundraiser, digital yearbooks have huge potential. Consider that by purchasing a $1 CD or DVD and selling it for $20, you'll be making $19 on the sale of each yearbook!
The only digital yearbook I've tried is
Yearbook Alive
, which is great. I'm sure there are others out there, but this one is pretty easy to use, so I keep coming back to it.