Bad idea in general but a necessary evil in some cases.
Why?
They move the wheel outboard to a position they weren't designed to be in.
1) This looks cool but it changes the steering geometry. In extreme spacer cases, it will lead to very heavy steering and poor steering returnability from off-center.
2) The increased offset increases loads on the wheel bearings. Small offset like 1" not so big a deal. 2" is adding serious loads to the bearing. Either way expect degraded bearing life.
3) Adds rotating mass to the wheels. Rule of thumb. Taking 1 lb off wheel rating mass has about the same effect on acceleration performance as taking 10 lbs off the body. Probably not a deal breaker for anyone but it is there.
4) Potential source of imbalance. Well made spacers with a decent fit to wheel lugs/studs aren't too bad. Home brew or universal fit spaces with non-sysmetrical patterns will add imbalance to the vehicle but aren't easily compensated for without doing on-vehicle wheel balancing. Not many shops around anymore that can do or will do on-vehicle balance work.
Having said all that I will end up using 0.75" to 1.00 inch spacers on my flared vehicle.
See picture on page 1 of my thread for example of poorly executed home brew / universal spacer.
http://www.914world.com/bbs2/index.php?showtopic=335209