i rented a 15 person villa this last September for me, my girlfriend and our friends from all over the world. it was very affordable (around $500 USD per person for the entire week) and i would NEVER consider going back to Ibiza and using hotel.
we rented out a 500w sound system (from Adam Deuce - great lad 8) ), rented CD decks and rocked out tunes by the pool for the entire week. the only negative side to the villa was that is was sort of far from all the action. it was in the hills about 8 minutes north of San Rafel, which is sort of far from Ibiza Town and PDB. it would have been nice to be a little closer. that said, our villa was very secluded and private, with a wonderful view that stretched across the island to Ibiza Town and ocean. no neighbors to give us any sort of hassle about early morning tunes!
we also saved quite a bit of money by doing massive trips to the supermarket. we managed to avoid spending a lot in over-priced restaurants and when we did go out to eat, it was only at carefully chosen restaurants that we wanted to enjoy. it was perfect.
this is the villa we rented:
http://villasinibiza.com/Default.aspx?go=Villa&PrID=172
it was quite an old house, but we all really enjoyed it. at over 300 years old, the rustic setting was a nice retreat from the craziness of the clubs and crowds 8)