I used to work from home 3 days a week. Call forwarding & VPN.
Upside: Very easy to dig into projects uninterrupted. You can really make a lot of headway without the typical office distractions, like chatter and people stopping by your desk. Great for peak workload times when you'd have to be kurt in the office and tell people you're too busy to chat.
Downside: You get out of tune with office dynamics & politics very quickly. I found I was focusing too much on my individual workload, and wasn't as aware of what was going on within my team and elsewhere in the company. You also lose all the context of who's stressed, who's getting divorced, who's mad at who etc… Surprising how important that stuff is. You work with people differently when you know what's going on in their lives.
I only work at home 1-2 a month now. Usually when I'm sick or when there is a project that needs 100% focus. I overfeed the dogs so they sleep a little more and make less racket.
