We pulled the plug on cable 2 years ago, and have no regrets. I built an outdoor HD antenna which gives us dozens of amazing high def channels. Using Windows Media Server on a home theater PC, we record many of our shows via the TV antenna. Additionally we subscribe to Hulu+. We tried Netflix again this year, but were disappointed with the diminishing selection. We prefer to use Amazon Prime for our few movie needs. But for Hulu+ and/or Netflix, we absolutely love our ROKU box that elegantly streams the content to our TV. Our cable bill was probably $120/month. We now pay about $7 or $8/month for Hulu+, and the Antenna I built cost about $20 of materials. Between the free Amazon Prime tv shows and movies and Hulu+, and the free over-the-air TV broadcasting, we don't miss any of our shows. Even if we subscribe to both Hulu+ and Netflix, our savings is over $100/month. And we don't sacrifice any content.
For equipment, look into the "HD HomeRun". It's an external TV tuner that can record 2 over-the-air TV shows at the same time. We use the free Windows Media Server on Windows 7, and it works great. The only other hardware we recommend getting is a Roku box. While I built a fancy antenna, you can just as well use any existing antenna or go buy one at Radio Shack or any local hardware store. With proper mounting, our antenna picks up stations 30-50 miles away.
It's worthy to note that as great as Hulu+ is, there are some shortcomings. 1) If a show airs today, you won't get it for a few days on Hulu at the earliest. 2) Some networks don't allow their shows to be viewed via Hulu (Yes I'm pointing the finger at you CBS). 3) Even with the fastest internet connection in our area, Hulu sometimes 'hiccups' and we have to wait for Hulu to regain its composure. 4) Show's don't stay available on Hulu indefinitely. Don't wait too long, or the show/season you want to watch may just go *poof* one day and will no longer be available.
For these reasons, I strongly recommend having an over-the-air antenna for watching the shows you can't get online. With software like Windows Media Center, you can turn a home theater PC into a DVR that will record over-the-air TV. You can also buy a cheap remote control that plays nice with Windows Media Center. It 'almost' has that cablebox DVR feel without the hefty price tag.