I voted "On" in the context of CS:S. The game is meant to be a tactical shooter and with an appropriate number of players (5v5 is my favorite) shouldn't be a problem, you'd have to legitimately mess up to kill a team mate. For other games it really depends. Killing Floor has the option of FF On, it's an absolute nightmare and ruins the game completely. TF2's also a nightmare with FF On, the game's designed to be too wild. I don't even like FF in BF3, in theory it's cool to have the whole target aquisition thing, but in practice it's a massive headache having to deal with 31 other players all ready to sprint in after that well timed and carefully planned grenade. My rule of thumb is that if I'm playing with randoms then off, it's just not worth it anymore.
It should be on. FF makes you pay attention. I can see the argument for off in some public quick match servers. I also find it annoying when half the weapons are not available for no good reason... Some of the 'knife only' servers can be pretty funny though.