I just got back from a 4-night trip to Zermatt, staying at the Cima Garni. This is a great value. Owned by a a nice elderly Italian man who lives onsite, it's a homey B+B. I paid about $60/night in high-season ... can't beat that.
Pro:
Location: Awesome, awesome, awesome. It's less than 200m to the train station, 2 of the 3 village lifts to the slopes, the village grocery store, and the main street with restaurants/shops. And if you want to take the Matterhorn lift (about 1km on the other side of zermatt), the free village bus starts its run near the train station and you'll be one of 5 people (out of an eventual mob scene of 50+) to have a seat.
Breakfast: I've stayed at alot of european B+Bs. Breakfast at cima is above avg. They have a starbucks-like giant coffee machine that produces excellent coffee. Nice assortment of rolls, yogurt, cheese, etc and all you can eat. Breakfast room has a perfect view of the Matterhorn and they have a girl bringing coffee to your table. I ate so much I was able to skip lunch.
Basics: Cima gets the basics right. There's a ski room in the basement with heated racks to dry your boots. My room had cable TV, though only 3 out of 40 channels were in english. Rooms and bathrooms were clean and they have daily maid svc. The owner is friendly and helpful with advice. Though it's in a central location, by 11pm it got very quiet and I had no trouble sleeping.
Cost: very cheap. Zermatt is an expensive village. You can't go to a sit-down restaurant/cafe for less than $30/person and most are $50+ and there aren't many take-out options (of course, like the rest of europe, wine is amazingly cheap). Save your $ for ski/food and stay at Cima.

Cons:
Run-down: this place ain't pretty. The room was tiny. All of the furnishings are worn, old, and cheap. Walls are thin and you can hear people walking around. My room didn't have a bathroom and the one in my hall didn't have a shower so I had to use the one in the basement, which was about 2ftX2ft.
Pre-internet. though I managed to book my room via a web-based booking agency, cima isn't internet friendly. I don't think they even have a computer onsite and there's no way to communicate with the owner via email. He maintains his financial books with pencil/paper and accepts only cash.