The problem I see with most people who use digital compacts for family/holiday snapshots is that they don't tend to print them out any more so they only exist on a computer or a CD.
The advantage of proper pictures in an album is that you can look at it at any time. Another scenario would perhaps be clearing out the house of a deceased relative - not a nice thing to do in any circumstance but if you find an old album, you will usually have a look through it and recall some happy memories.
If you find a CD, you are unlikely to spend time putting it into a computer to have a look. These images will probably be lost forever.