So what's the basic rule of when to spray with PAM etc or when to use olive oil?
For ex, for making an omelet, I usually use the spray.
First of all, with omelettes--any sauteed eggs really--I much prefer butter. And with omelettes, less than a teaspoon is sufficient; swirl it around the pan until fully melted, then pour off the excess. In this case, you would be using the butter for flavour, not any specific physical properties. For scrambled, user rather more. Fried eggs are generally the only time I will use olive oil, and even then I will use a mix of olive oil (for the heat) and butter (for that flavour which goes so well with eggs).
In general I prefer to avoid sprays (unless you are talking about a pump-action spray bottle which you fill yourself) as there are propellants and such used in sprays to make them work. Personally I prefer to avoid multisyllabic synthetic chemicals in my food whenever possible.
But if you must... sprays are most useful when you need a very thin but even coating of oil. Omelettes are a good example, though honestly I cannot think of another use in cookery where I would find a spray advantageous.
In baking, however, sprays can be quite useful. Especially when baking tarts, pies, or cakes which call for the pan to be buttered and then floured. A quick spray makes things much simpler.
With using oil, make sure that you're paying attention to the smoke point. Extra Virgin Olive Oil isn't good for higher temperature cooking - you want a higher smoke point oil at that point.
That said, I only use sprays for baking. Otherwise I use one of butter, vegetable oil, peanut oil, or olive oil.
I only use spray when doing things like waffles in an iron, possible pancakes too.
Otherwise it always OO or butter for some things (like eggs as roux says).
I recently bought this oil mister (http://www.amazon.com/Prepara-PP02-OM100-Oil-Mister/dp/B0026L7BNU/ref=sr_1_1?ie=UTF8&qid=1286686630&sr=8-1) and filled it with olive oil to have another option besides the aerosol spray cans. Works pretty well, doesn't include any other ingredients, and can be refilled easily from large bottles of oil.
You can also use a pastry brush to brush oil on the pan to avoid using too much oil and in lieu of sprays.