From what everyone is saying interfolio is definately the lifesaver. LORs are sent directly to the school unless you use interfolio then its uploaded to the site and you designate where it goes. I haven't used interfolio yet, but I believe is this correct.
Yes I used interfolio last year, DEFINITELY a great service, highly recommended. (I found out about it after an SDN member recommended it) Letters are sent by the recommender directly to Interfolio (by mail or uploaded & signed electronically) The best two things about this service are:
1) letter writers mail 1 letter total rather than separate letters to each school, no need to ask the writer if they sent letters to school 5 and school 8 and school 12.
2) student has complete control over when letters are sent out and to which school, many schools accept interfolio letters "electronically" and they are "sent" from interfolio to the school within 1/2 day or less.
as an aside, I've lost touch with one person who wrote me a LOR, but she sent it into Interfolio, so no problem having this LOR forwarded to schools.
Finally, price is good, around $15 annual membership + a couple bucks (around $4-5) per "packet" of letters sent to an individual school.
ps I have spoken with quite a few schools and have not heard of any that will NOT accept interfolio or similar services, some schools i.e. Colorado will ONLY accept an electronic letter consolidation service like Interfolio.