The first consideration is whether you will stay inside Walt Disney World or outside of it. If you plan to spend your entire vacation at Disney, then you will generally want a hotel on Disney property. Additionally, if you are flying into Orlando, then you will generally want to stay at a Disney-owned hotel on Disney property.
Staying at a Disney-owned hotel allows you to take advantage of the Disney transportation system, which provides comfortable and efficient access to all Disney attractions via bus, boat, and monorail. Additionally, Disney hotels provide free transportation to and from Orlando International Airport via the "Magical Express" buses. Therefore, it should neither be necessary to rent a car for an all-Disney vacation nor to worry about driving and parking your own vehicle. Additionally, if you have reasonably well-behaved teenagers, you can turn them loose in the park without having to worry about transporting them or reconciling all of the conflicts between your desired itinerary and theirs.
On the other hand, if you also plan to visit other Orlando-area attractions such as Universal Studios or the Holy Land Experience, you will need a car and will be better served by staying in an off-site hotel. Few Disney resorts offer car parking that is convenient to the guest rooms. Additionally, Disney World is a long way from other Orlando-area attractions, and Disney property itself is so vast that many of the hotels located there are long drives from the entrances and exits.
Likewise, if you want to rent a condo or kitchenette, then you may want to stay off-world even if you are taking an all-Disney vacation. The Disney-owned Fort Wilderness Resort and Campground offers cabins for rent, but otherwise the only condominiums available on Disney property are those affiliated with the Disney Vacation Club time-share program. The time-share "villas" are available for rent to the general public when the club members are not using them. However, you can probably get more for your money by staying off site.
Not all of the hotels located on Disney property are owned by Disney. Several are owned by third-party operators such as Hilton and Starwood. These third-party properties generally offer better value for your money than the Disney-owned resorts, but only one of them, the Starwood Swan and Dolphin, connects to the main Disney transportation system. The other resorts provide more limited shuttle services that are not really a desirable substitute for having access to a personal vehicle. Additionally, only the Disney-owned hotels provide the "Magical Express" bus service.
Interestingly, one of the third-party resort owners at Disney is the United States Department of Defense. If you are a member of the United States armed forces or a civilian employee, you should consider staying at the Shades of Green resort, which offers very favorable rates. The web address for this hotel is http://www.shadesofgreen.org/.
The Disney-owned hotels come in three price categories: Value, Moderate, and Deluxe. While every hotel is unique, they can be summarized as follows: The value resorts cost roughly $90 to $140 per night, depending on the time of year. The rooms are tiny (not really comfortable for more than two people), there are no table service restaurants on site, all transportation is by bus, and the recreational facilities are basically video game arcades and swimming pools.
The moderate resorts cost roughly $150 to $250 per night. Each one except for the Port Orleans French Quarter has a table service restaurant, and they all have pretty good food courts. Both of the Port Orleans hotels offer boat service to Downtown Disney/ Pleasure Island. Additionally, many feature boat rentals, bike rentals, nature trails, and so forth in addition to swimming pools, playgrounds, and arcades. The rooms are comfortable for up to four people, but not luxurious. Each hotel has a unique theme, lovely decor, and beautiful landscaping.
The deluxe resorts cost $300 per night and up, though you can occasionally find a room (not one with a view...) in the $250 range at the Contemporary and Animal Kingdom Lodge. Each one of these hotels is an architectural masterpiece and houses at least two table-service restaurants, some of which (like the California Grill and Victoria & Albert's) rank among the best restaurants in Florida. The rooms vary widely, but many have balconies, flat-screen televisions, and desks, office chairs, and sofas for reading or working on the computer. Three of these hotels (Contemporary, Polynesian, and the Grand Floridian) are on the monorail line, affording rapid access to the Magic Kingdom, Epcot, and the other monorail resorts (and their restaurants!).
It is difficult to summarize the recreational opportunities at the deluxe resorts, other than to say that they are impressive. Each of the monorail hotels, as well as the Wilderness Lodge, offers boat rentals on Bay Lake and Seven Seas Lagoon, the largest stretch of navigable water at Disney. Animal Kingdom Lodge has its own, private African game reserve (shooting to be done with cameras only, please), and the Yacht Club and Beach Club share a private water park called Stormalong Bay.
Finally, here are three resources that are indispensable for planning a Disney vacation: First, you need a copy of The Unofficial Guide to Walt Disney World by Bob Sehlinger. This is the definitive book about Disney World, and it is updated every year.
Second, check out the website All Ears Net: http://allears.net/index.html. This is the king of all Disney websites.
Finally, you should never book a room at a hotel without first consulting the user reviews at Trip Advisor: http://www.tripadvisor.com/. While the hotels at Disney generally have good reputations, their quality (even at the deluxe resorts) can vary from year to year with turn over in personnel.