I use a combination of both types of links, absolute and relative.
I think they each have their advantages.
The only thing I try to be fussy about is being as consistent as possible in the format of the links. For me this means always including the www. in absolute links, and always adding the trailing slash to all links.
The old arguments about server performance still have some merit, but servers are a lot faster nowadays than they were when those conventions were first started, and I tend to think they aren't as critical nowadays.
But, it's pretty clear that consistency in link format, to avoid duplicate penalties and pages ending up needlessly in the supplemental results, is a discipline that results in more dollars in the pocket.
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