There is much discussion of these issues by archivists (surprise), and lots of relevant but not definitive info on archives and library web sites. I'm not a techie but here's my 2 cents worth re the "non-technical" basics, as learned from an electronic records archivist colleague:

The 3 "enemies" of preservation of electronic records are, in this order:

1. Obsolescence of the software to read the files.
2. Obsolescence of the hardware.
3. Degradation of the medium that holds the digital information.

For this reason the preferred place to preserve electronic records is on your hard drive. Better to buy more memory and keep your files where you have a better chance of knowing what's happening with them and where they will be migrated forward through any upgrades. If you use CD-Rs to "archive" your files, use good CDs, good procedures (including quality control checks), keep them compatible with your software and hardware, and be prepared to burn new ones about every 3 or 5 or 10 years. Guess it depends on how important they are to you (a risk analysis thing).

The preservation issue is one side of it, but there's also the disaster recovery issue – hard drives crash, get viruses, etc., so you need back-ups. This is where CD-Rs and other off-line media are really valuable.

For back-ups my colleague recommends using either a good quality CD-R (gold, with phthalocyanine organic dye, they look light green) or DLT (digital linear tape). There are ANSI (and possibly ISO?) standards for CDs now, and probably for the processes of writing them too, and better quality makes a difference.

Magnetic media of today can be as good as or some say better than optical media like CD-Rs, if properly made and stored. Manufacturers of both claim that they will last 50 or more years, but the archivists I know don't trust them more than 3-7 years. (As stated by others, commercially pressed non-writable CDs may last longer than CD-Rs.) Treewind, I don't know much about magneto-optical disks but they seem to be widely used. The general advice for long-term storage is stick to something that is widely available and well supported, it's more likely to work in the future.

If you REALLY don't want to lose your digital information, keep it on more than one medium. We have loads of digital photos and music as well as the home business records and other stuff, and we just added a new pair of twinned hard drives. We mirror the hard drive, and we also back up the important files to CD-Rs (Maxwell) regularly and keep them in a different place. Something like John Ross's archives.

And of course, whatever media you use should be stored properly. Some basics for CDs and tape cassettes: relatively constant temperature and humidity (the ideal is about 18-22C and 35-45%RH), handle by edges, with clean hands (cotton gloves if you're an archivist), store CDs in polypropylene or polycarbonate cases (I think they're the sort of frosted but slippery feeling ones - don't use paper), store vertically, keep them in the dark, label CDs with special markers (not adhesive labels), etc. And you probably know, if you need to clean a CD, move from the centre to the outside across the tracks, not in a circular around-the-tracks motion.
Oh yes, the mould story. I'm told it can happen to CDs but not a real problem unless you leave bits of food on them…