Jeremy Wagstaff's LOOSE Wire blog is running a great series of entries on Moleskines (paper journals) and how people use them in conjunction with PC and Mac-based Personal Information Managers.
I use paper journals because I enjoy using fountain pens and ink. Over the years, I've experimented with every PC PIM around, but I prefer using paper and ink to think creatively. If I read an entry I made in a paper journal three years ago, I read the more than the words: I read how I was feeling at the time I wrote the words. This comes across more readily when you handwrite.
In the item "The Moleskine Report, Part V", Patrick Ng says:
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On top of the above, I love to put things down on paper artistically, especially my thoughts and feelings and dreams. The texture of paper, the way ink or paint behave differently on paper, the millions of possible ways to use one page.... these aspects seems irreplaceable by digital. So after over 10 years of struggle with digital devices, I came back to pen and paper for certain tasks and personal enjoyment, and digital for the inevitable.
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Precisely and elegantly put. :-)