It's a very visual industry, and it is hard to walk people through your work on a telephone line. It's also hard for the opposite to happen, people walking you through work they want you to do. However, that depends on the role. I work in most facets of GIS, and in development, as long as you have a project plan and a clear idea of what you have to produce, you can very easily work from home. However, I have also been in charge of producing ad hoc maps, produced from rapidly evolving data models, and you can't do that offsite.
It depends. I asked a question not long ago about the impact of the Cloud on GIS and one of the main ones, will be the ability to do almost anything on the cloud, freeing up the labour, but in some parts, you'll always have to be on site.
I thought I'd edit this and add my tuppence on benefits etc:
Pretty much as mapperz has suggested.
I like the flexibility of taking the kids ot school, having lunch with my wife, sometimes just plopping out of bed and going to the office in my pj's with a saucepan of coffee (cautioned by the next comment).
I work better if I dress for work as I normally would and, yes, this does include a tie. If I don't dress up, I am lethargic, and look for ways not to work.
I work a lot harder from home, I get an awful lot more done.
Don't have the radio on, it distracts you, and once, when I hooked up Sky Sports onto the laptop and watched cricket, I got nothing done. The best part of working from home is the absolute lack of distraction you have, if you are disciplined and it's this that frees up your time; for me, 7 hours at home is worth a lot more than 9 in the office.
I hate the travel that comes wrapped with my work. Not doing the soul destroying commute makes me smile a little more inside.
Very easy to get distracted.
You will work harder, sometimes at the cost of your own personal life. For me, I don't mind this so much, as it is outweighed, imo, by the other benefits.
And pretty much as what Mapperz said.
My choice, however, is as it is. Keep this away from my wife, but I love being able to work away, as I get more sleep (3 kids, all young). But I also like working from home 2 days a week too. I think it is the best of both worlds. But then, I would, wouldn't I!