Coding Horror has a great article about CAPTCHAs up which cna be found here. I have seen / heard of programs that defeat captchas but ideas like the turing porn farm (read the article about this) are a smart way to defeat captchas or any other human / machine difference engine but not widely implemented (yet). I also like to bring up the point that CAPTCHAs prevent the visually impared from validating themselves. I have seen some websites that have an audio clip that the visually impared can use to validate but this is fairly uncommon.