Growing up in Oklahoma
Thank you all for weighing in yesterday in the comments. I hope it didn't come across that Michaels was not a perfectly acceptable place to buy yarn! I truly think it is -- but I don't look forward to a trip to Michaels with much anticipation nor do I feel delighted when I leave. Compare this to my yarn store trips . . . which I usually DO look forward to and enjoy.
I always count my knitting anniversary as December 2003; however, I learned how to knit in the 70's in Oklahoma when I was a Girl Scout. My mom bought my yarn and supplies at TG&Y in Del City, Oklahoma. At the time, I know they carried Sayelle and Wintuk (both brands have been absorbed in to Caron International). I bought pink and navy blue yarn and learned the knit stitch -- that was the extent of my knitting experience until recently.
As a knitter or crocheter, you should buy what's affordable and appealing to you -- no matter where you CHOOSE to go to get it. However, if you want to get more out of your hobby, I suggest visiting your local yarn shop. You're not obligated to buy anything but it might be a worthwhile (and possibly fun) experience.
In the U.S. your alternatives to yarn stores include Joann, A.C. Moore, Hobby Lobby, Michaels; you can sometimes find odd lots of yarn at Tuesday Morning and Big Lots. And of course, there's always Wal-Mart (though it's my understanding they are going to eventually phase out the fabric department -- which if you read between the lines is a boon to smaller businesses that cater to niche markets).