1) You have written a memoir or cookbook that you want to share with family and friends. Professional editing and cover design/interior layout are not an issue. A POD self-publisher like Lulu or iPublish is an inexpensive way to put a book into the hands of friends and family.
2) You have a successful business and a book will enhance your authority as an expert. You prefer the 50%+ of the cover price you will receive via this process than the 7-15% you will receive via traditional publishing. You can write the initial expenses off against marketing, and declare income as you hand sell books to clients and at lectures. In this case, it is worth the money to hire a professional editor, an experienced book designer, and create a combination of printed physical copies and a POD set-up with someone like Lightning Source.
3) The expenses involved in creating a professional quality self published book are worth it to you in the same way that going on a vacation is worth it–you are unlikely to make a profit, but the mental and emotional rewards of having your book out in the world, along with the statistically slender chance that your book will hit, make it worth the money.
That is one of the most-clearheaded, accurate, and helpful posts about self-publishing that I've read in some time. I agree with everything she's said. But I would add one more important criteria — self-publishing makes sense if you have written a non-fiction book and have a built-in sales and promotional platform. In other words, if you lead seminars, have a TV or radio show, teach a class, preach to a congregation, etc…a stage from which you can promote the book and a ready-made venue/audience for selling it yourself.
UPDATE: Jane Smith pointed me to this excellent post that makes some excellent points about self-publishing Here's a taste:
4) Nearly all self-published books sell in minuscule numbers. How many friends do you have? How many could you persuade to part with cash? Well, that's how many books you will probably sell. Unless you are a seriously brilliant and dedicated salesperson and are prepared not to write any more ever again because you will be selling, selling, selling. You will lose hair, weight (hmm, good idea), self-esteem and years off your life; you will gain wrinkles, bags, and new respect for book-led publishers. You will probably not make any money but if you do, you will be rightly proud of it. But too tired to do it again.
5) Whenever someone tells you that publishing is "broken", ask yourself who is saying this and why. Is it a published author? Is it an author who has won awards, received good reviews, has a genuine fanbase? Or is it someone who has either failed to get published or who has decided to make money out of other people's failure to do so?
6) When you hear about a self-published book becoming "successful", (and this does occasionally happen, but much less often than you are led to believe) realise that this success nearly always happens when a book-led publisher takes on the formerly self-published book. So, is that a self-publishing success or proof that publishing is neither dead nor the future?