I use Word, and I have to hand-write a lot of my notes (no laptop policy in three out of four classes this semester). There are benefits and drawbacks. The big benefit to typed notes is that you get to ctrl+F during the exam for things that didn't make your outline (e.g. the nitpicky point about different burdens of proof for collateral estoppel didn't make my outline, b/c I was trying to keep it short, but I remembered my prof talking about OJ Simpson's two trials, civ and crim, when we talked about it in class, and I was able to ctrl+F "simpson" to find where we talked about it, and where I had noted down what she said). It's also much easier to make your outline at the end of the semester if your notes are typed, since there's more copy-pasting. Another upside is the ability to multitask during class (e.g. answer important emails, etc.). The downside is the obvious f-ing-around-on-the-internet problem.
The upside to pen-and-paper, at least for me, is that I do listen significantly more. Another upside is that if my computer crashes, I don't have to kick myself for not backing things up to my external hard drive as often as I should. The downsides are that it's more expensive (my laptop is a sunk cost (?) and I have to shlep out to buy pens and notebooks), my notes are messier, and it's a pain in the tuches to transfer everything over at the end of the semester.
Overall, I'd say I prefer taking notes on the computer, but hand-written notes aren't the death of me, and have some major benefits.