As for the booking agencies, I will try to avoid them. I hate businesses based on making money from other people's work.
They don't do anything. Just book a room and get some money from the hotel. Furthermore, you can be sure the hotel will, somehow, pass on to you the commission they are charged for the agency service. If you want to keep hotels / hostels prices low, then book direct with them.
A good example of what companies can offer by saving on commissions is
easyJet . This airline only take bookings through its call center and through its website (and they encourage people to book online). Since they don't have to pay commission to travel agencies, they save money and they can offer better rates.
Iberia also has discovered the power of the internet and it's selling lots of tickets through the internet offering the best deals online only.
Regards,
Antonio