This started as a question on the community forums, and my answer got so long I decided to capture it here as well.
In general, when you are choosing an infrastructure model the first question you need to ask is what your team is comfortable having responsibility over, and what your organization is willing to pay to have somebody else worry about. You could do it in-house, pay a managed services group or Sitecore partner, or have Sitecore do things for you. Figure out what your team wants to have responsibility for and then that will guide you towards the best hosting model for your production environment.
