Should a blog be on it's own website or part of the 'real site'?

What are you trying to accomplish with the blog? That might help answer your question.

It can be done either way. Is it something really useful and worthwhile? Then put it on the main site.

If it is just to get another listing in the SERPs and drive traffic to the homepage, give it its own site.

Just don't fall into the trap many offliners are in of believing every business should have a blog. If it makes sense, no problem. Too many offline courses teach to set one up for every client, and for many local clients I think it is really unnecessary. A Facebook page can be far more beneficial and be used in pretty much the same manner.

There's my $.02

I think it depends on the kind of business it is. This is of course just my opinion but, I think not every business needs things like blogs, facebook, or even twitter. Now I can see all the fingers getting ready to hit their respective keyboards in anger, but hear me out before you call me an idiot and try to convince me that facebook is perhaps the greatest marketing tool since the invention the written word.

Many of us, perhaps the great majority of us, market our services to the small business person. This may be a one man operation, or something much bigger. Regardless of the size of the business, it would probably be safe to say that they have no single person who would be responsible for the day to day management for the entirety their online efforts. My point being beyond what the purpose of the blog or facebook page maybe, who is, and how often will either of these be updated?

It's difficult to visit just about any website these days without the facebook icon on it, or a link to the company blog. Few things look worse (IMHO) then a facebook page with virtually no activity on it or a blog that still says "hello...I'm just another wordpress blog" or perhaps has a posting or 2 but nothing on it for months.

It's a lot like the days when people put counters on their sites and it remained in single digits. If I were suggesting to a client that they might want to consider a blog, I would add that they need to allocate a certain amount of time to add information on a regular basis. Establishing a need for having one is only the first part of the equation.

I would put it down to personal preferance. Although the content on the blog may either boost sales or lower them, depending on the content. So be mindful of this :]

I agree with the above poster, not every business needs a blog, but if they do, then I say put it on the main site to attract search engine traffic.