1. I absolutely LOVE LOVE LOVE location shoots.  Sure you can't predict the circumstances, but they are so much more fun and interesting than studio shoots, imo.   I love the variety and the in the moment kind of on the spot feeling I get when I'm doing a location shot.  Now, don't get me wrong, I'll do studio shoots, but location shoots are just more fun for me.
2. location-->pros: clearly have variety and just lots of different props that you can work with, cons:unpredictable, slave to the weather conditions, etc, what everyone else has already said
studio-->pros: controlled environment, privacy, cons:not as much variety, less freedom
3. I think that the industry caters to interesting, different shots no matter whether they are location or studio.
4. I do not think location shots distract from the model unless the model allows him/herself to be distracted by the location.  I think that if a model is truly dedicated to the shoot, they will look beyond any distractions to produce great work.

oops, dbl post

I'm gonna have to say location, just because im poor but then again ive turned some houses into makeshift studios.

I interpret atmosphere, the true underlying subject here, as location or environment plus lighting.  From there, resources (in terms of spaces: int. vs. ext.; private vs. public;  groomed vs. natural vs. urban; etc.; in terms of lighting: open or shade; time of day; no artificial modification --e.g., no bounce card -- to full studio controls; etc.) plus conditions (weather) contribute to the look of the thing.

Some things I've learned shooting outdoors:

1. Work with the season and weather.  I can't fake a chill Fall day if it's in fact an Indian Summer day and 90-degrees in the garden (and God bless you if you can);

2. Thank you Dan: if you can push light into the eyes, do--the sky as a "large light source" remains a large overhead light source, so a bounce card, the side of a building, off-camera flash and such may help open up shadows beneath the hair line, brow, nose, and chin.

3. Until just about magic hour, if you're keeping it simple, the sun's a cool hair light.  Conventions run against blow-out, of course, so if the back light's hot, one really should do something to bring the rest of the scene up (or otherwise minimizing the effect of direct sunlight on the call on exposure).

I would love to set up a shoot in a private garden (with studio lamps)--if anyone's got that space to offer in my neck o' the woods, I am there!

well, i have done both. obviously. and even though getting the hair outta my face, the fabric  air borne and striking an interesting, and ladylike pose are all pains in the arse...i'd still take location over studio.

as a model, the studio can be boring, and tedious. but allows for the most challenge b/c it is just you in that picture, so you have to make it interesting. however, as a model, location is just easier to be spontaneous, catch more candid poses. and from my own photography experience THOSE are the shots that everyone loves.

so- final answer: location.