The use of logical volumes (instead of loop files) is now almost given for suggested. Loop files had a big advantage, i.e. the possibility of using "cow files". Now it is possible to make something similar with LVM.
There is a case in which using cow files is not just suggested, but necessary: it is the situation where one must use a virtual machine for every user, i.e. for windows xp virtualization (windows xp does not allow multiuser by default). In this case one could use loopfiles and cow-files, or try LVM2 snapshots, as explained in the link above. It has got an impact on performance, though. Any guess on how to avoid this?