Both my cats wear collars with ID tags, even though they're 100% indoors. I feel safer knowing that they're collared and ID'd so that if, heaven forbid, they ever get out and go for an extended adventure, anybody who finds them will a) know that they're not strays and that they have owners and b) obviously, if someone finds them, they'll be able to contact us and hopefully get our babies home as soon as possible.
Coda is microchipped (one of the perks of adopting from our local shelter - all their kitties are microchipped and the correct contact information is updated before they're adopted out), and I'd like to get Cal chipped as well, but I still like them to wear collars, because that way anybody off the street can see their contact information, without having to take them to a shelter or a vet's office.
Plus, it's true that collars are way cute. Currently Coda is sporting neon pink zebra print, and Cal's got bright blue leopard print. And I like having little bells on them. If someone has left the door open and I'm trying to account for both kitties, being able to hear them is a plus.
EDIT: I always use breakaway collars, just to be safe.
Jennifer and the kitties, Coda and Caligula