A smart developer I respect recently asked my why I didn't just register my domain names through my hosting provider. I hoped he was joking, that he knew why this was a horrible idea. He did not, and I know some other smart people who register domains with their hosting providers. Education is needed.
The problem is simple: conflict of interest. Should you ever decide to switch to a different hosting provider it's in their best interest to prevent you from moving your domain. Why? Because if you point it to some other hosting provider you stop having to pay them.
It doesn't matter how great your current hosting provider is. It doesn't matter how great their morals, customer support, or promises are. There is no guarantee they won't be bought by an ass-hole tomorrow. There's no guarantee some greedy concepts won't start to permiate their management.
Your domain name is your online identity, or that of your company. Do you really want to risk the possibility of having it stuck at a company with rapidly declining quality of service or support? Or, maybe a company that starts jacking prices through the roof? If your hosting provider controls your domain name's registration you are taking this risk.
The solution, however, is simple, and cheap. Transfer your domain to a company that is primarily a registrar today. You don't need to change your hosting setup, and you don't need to wait until your current domain regstration is about to expire. When you transfer a domain name you get the current time remaining on your registration plus the year, or more, you choose to pay for at the new registrar.
Currently I'm recommending people go to Hover.com. I don't get anything for referring you there. They're just refreshingly easy to use and don't try and sell you any other services.
Before you say "my hosting company would never prevent me from leaving." I would remind you of the famous saying
Those who cannot remember the past are condemned to repeat it.
- George Santayana
While it may not happen much these days, back when hosting providers started offering registration services this practice of locking customers in was actually quite common. I encountered quite a few people who were forced to abandon their domain name because they wanted to leave a corrupt, or at least bad, hosting company.
There are some measures in place to help prevent this, but you will still have a miserable time getting your domain away from a hosting provider that doesn't want you to go and tries to thwart your exodus.
If you have any domain names that are currently managed by your hosting provider, please transfer them away ASAP. Most of you won't have a problem. Some of you will. For those who will, keep in mind that it's much better to learn your hosting provider is an ass now, then when you actually need to move it at some point down the road.
Update: A response to the comments
The key to this happening is that hosting providers your register a domain name through will frequently set themselves as the administrative contact, because, they would argue, they are the ones administering the domain. You've paid them to do so. BUT the administrative contact also holds the keys to the kingdom as it were. It's their email address that will be involved in the confirmation process during a transfer, and their approval of the transfer that will be required.
It's absolutely true that the situation has gotten better, and that you're safer with the large, well established hosting companies, but I'm not trying to spread FUD here. This has happened in the past to many companies and individuals, and I would not be surprised to hear that it's still happening. Yes, there are higher authorities you can go to, but in the end most people who encounter this problem fight with their evil host for a month or more, and don't know who that higher authority is, know how to report it to them, or have enough fight left in them to bother starting the whole process over again.
Some helpful folks have mentioned some other great registrars in the comments, and I do have domains at Gandi.net but I'm recommending Hover because they don't try and sell you anything else and the've got a nice uncluttered and easy to figure out UI.