We recently changed our seating layout to Open work space. We have found a lot of benefits having the whole team together with no boundaries. Problems are solved faster when you can turn around and ask questions to the people that know. There was some initial concern about proximity to other workers. That has not been a problem for us as we have made this transition.
If you search the internet for Open Work Spaces you will see a lot of posts on its benefits and some issues. I thought this article from Life Hacker was interesting. We are not as clean and neat as they have but we are in our first phase. We essentially removed cube walls and pushed desks together. Stay tuned for our second iteration, I will come back to this once we are complete with that.
I am thinking the Open Work space concept works great for creative teams like software development and design. Some other styles of work may require more privacy. As they say your mileage may vary.