My handwriting is absolutely horrible. Always has been. In fact, I don't even write (cursive); I print. It still stinks. Maybe it's the way I hold a writing implement, but after a few minutes of writing, my hand begins to hurt badly. So a computer is the way to go. Most of what I do, I do in UltraEdit32 in plain text. If I need tables or something fancy I can use Word, or one of the free alternatives available online.
On a PC I can hunt and peck so much faster than I can write it's not even funny. I have chatting with the guys I met playing Quake2 over the past eight years to thank for that.

Using a PC makes it so much easier to go back and change something, add material, move a paragraph, etc. And if I need to make a copy of what I've written (to use as a handout, for an extra hard copy, just in case) it's a snap.
I have a list of close to 500 NPC names I've created specifically for my campaign. Most of those names have background text to go with them and are separated by region. How many sheets of paper would that take up? I also use UE32 to search my campaign folder for any instance of a particular word, phrase or character (a name, a place, a rule, a dollar sign...) and list everything it finds. This is great for checking all of my documents for things. On paper I'd be searching my scribbles for ages to find the pertinent material.
Since I can't draw worth a damn either, pencil and paper aren't very vital to preparing for a game.
If the PC is off, I'm not at home or whatever, I'll scribble down a name or a brief note about something on some scrap paper. As soon as I'm back at the computer I add it to the rest of my stuff.
Of course, I still fill in the blanks on my character sheets myself.
For all you DMs that create your campaign world on your computer;
Always ALWAYS keep a backup copy somehwere! Print it out, put it on a floppy, burn it to a CD/DVD, whatever. Just do it. You never know when an accident, old hardware, theft or natural phenomenon could wipe out all your hard work. Thankfully, I've avoided this problem so far. The same could be said for the notebook, binder or loose stack of papers that the pen and pencil crowd use to create their worlds. One fire, hungry/incontinent pet, spilled beverage or stolen backpack later and you're back to square one. Of course, it's usually harder or more expensive (Kinkos) to make backups of paper-based info than to just print out or burn what's on your PC...