HDMI and Component Video are two interfaces (standards), which enable users to connect various video and audio sources to TVs or other displays and build their home theatre systems. While Component Video is analog and older video standard, it is not necessarily worse than HDMI and in some situations, it could be the most appropriate one to use. The HDMI cables deliver the data digitally, the same way compeers do and when linking one digital source to a HDTV, then there is no need for this data to be converted or processed in any way. However, the HDMI cables are not designed to work over very long distance and a cable, longer than 10 meters might not deliver any picture or sound at all. Of course, this depends on a number of factors, the used video and audio source, the used display, as well as the quality of the cable itself.
It should be noted that although the HDMI has an advantage over Component Video since it delivers both video and audio over a single cable and allows for neater setups, both standards support similar video resolutions and break up the images in a similar fashion. Component Video supports both 720p resolutions and 1080i, but cannot support 1080p, which HDMI supports. For users, who are planning on watching 1080p content, the HDMI is the obvious choice, but for most users both types of cables could deliver the same experience.
However, if you have purchased most or all of your equipment in the past few months and all pieces are HDMI-ready, then is makes sense to use HDMI cables. They allow you to transmit the audio and video over a single link and enjoy excellent quality picture and sound. If you are planning to have a setup, where one of the sources is 15 or more meters away from your HDTV, then you could link two HDMI cables with the help of an HDMI switch if one cable will not work. The HDMI cables support Dolby TrueHD and DTS-HD Master Audio and if you want to get the best out of your audio setup and use Component Video cables, then you would have to purchase separate Optical Toslink or another audio cable. In conclusion, the equipment on the either side of the cable is often far more important than the cable itself and is the most common source of issues as well.