A little while ago, I wrote a piece for Garden Design on lawn alternatives. There are some pointers there for possible substitutes, but most pertinent to this discussion is the question of design.
I hate lawn most when it appears in tiny little remnants that are impossible to mow but still require irrigation and fertilizer. I think a great deal of American lawn could be eliminated through careful design. I think some designers see lawn as the background onto which all other design elements are placed. It should be seen, rather, as a perennial bed, and should be used just as deliberately.