The answer is twofold. Depending on the voice you're attempting, you want to use contractions as much as possible. The given reason is contractions flow in reading more easily, it's an informal for a lay reader, and is more common in speech than anything else. Also, it's invisible in writing which is a good thing.
In dialogue, many recommend contraction use as opposed to the two base words. Again, the reason is it sounds more natural in dialogue. In almost all cases, editors and fellow authors advise using the contractions.
Now, the second part of the answer is to not use contractions if you are writing something formal or want character dialogue to sound stiffer or perhaps "upper-crust" as it were. In business, law, and other formal writing forms, you do not want to use contractions-do not as opposed to don't-because it creates a formal stance. This includes writing professional advice. Again, unless you are trying to create a friendly or perhaps more relaxed air, do not use contractions.
So, for most creative fiction forms: use contractions.
For formal writing or to create a more haughty air in dialogue: Do not use them.
Notice how I did just that when speaking about the two subjects?
Last words of advice: When using contractions, be sure the subject and verb are clear if the verb is a linking one. Don't use the contraction if it's clumsy or draws more attention to the word. So, do write: Shayne will get you for it as opposed to Shayne'll get you for it. Proper nouns are the key here
Finally, passive use can hide in contractions. I've got a story for you is passive. The "have" is hidden, but is there. Don't let passive voice creep into your prose just because the flow looks better. It has to sound better first and foremost.
Word to the wise.
