The main things off the top of my head:
1) Small limit in number of page hits. I don't think they'll go mad or anything, but if you're expecting tens of thousands of visits a day then it's a little unfair to use a free system ;) A couple of hundred or whatever and I reckon you're fine.
2) Flexibility. That's the main one. WP.com upgrade when they upgrade. You can use the templates they supply for the look and feel, not any of your own. You can use the plugins they supply, not your own. You can't edit or customise your templates. And so forth.
On the other hand, it's *incredibly* simple to set up and run with.
You pays your money, you takes your choice. I've gone for the self-hosting option as I like to fiddle and play with things like that. But for a simple blog, WP.com is just fine - as is *whisper*blogger*whisper* but I didn't say that ;)