In “Surprises, Again” I skirted the question: “Is self-publishing always vanity publishing?” So if you want to know what I think: “Could be, depends on motivation and economics.” Of course classic vanity publishing consists of paying for set-up and printing of a limited number of copies. The author is liable to get stuck for these copies if they are not a nimble enough book seller. Additionally the margin of profit isn’t nearly as deep as some of the current POD vendors.
In the current POD environment of self-publishing, there is little or no up-front fixed cash investment on the part of the author (I only paid for a CreateSpace upgrade) especially if you are something of a tech hound. I have invested in several books so that I can sell them to various friends and save for them the cost of shipping from Amazon.com. I also get a higher percentage of the take on these copies so I have been keeping a close record of my expenses. So far I have exceeded the actual out-of-pocket expenses of the book. I am free to order copies whenever I need them.
Additionally my POD publisher, CreateSpace is a subsidiary of Amazon so, as mentioned before, marketing can get viral at no expense to the author.
In the current state of the publishing market, as publishers decrease advances and ask authors more and more to do their own marketing (especially for the first-time author), there is a tipping point where getting ones book in print and marketing it by oneself may become more feasible than traditional publishing options.