Good question. When I was an undergrad, I thought it would be nice to get my PhD from the same school since it was close to my family and friends. I approached some professors about my idea and they informed me that it might be better to go somewhere else for my MA/PhD to obtain a diferent perspective on things. I didn't like that answer but I listened and applied to 2 out of state MA programs.
Looking back (1.5 years later), I couldn't be happier. I've seen a ton of new places, met lots of new people, and have somewhat of a different perspective on "psychology." I realized that my undergrad program was very psychoynamic and my MA program is behavioral. I didn't get much of the behavioral perspective from undergrad so I didn't know much about it.
Although, I have known some people who obtained their BA, MA, and PhD from the same institution. So it's not totally taboo, just not as common as going away for your MA/PhD.