Very nice article by Hallie Wilfert in the December '08 FUMSI. (FUMSI. I like to say FUMSI. FUMSI.) Key quotes:

• "...because web analytics data tells what people do on a web site, analytics data should be used to inform and direct more qualitative user research methods such as focus groups or usability tests that tell us why they do what they do. More importantly, you can use the natural interest people have in web metrics to introduce the more qualitative measures into the business overall."
  In effect, the data helps you determine what's going on and what are the important questions you should use qualitative research methods to answer (what versus why). My only quibble would be mentioning focus groups, which have incredibly narrow value among UX methods, but it's ultimately immaterial to Hallie's broader point.
• "Many designers balk at using web analytics because they are intimidated by the numbers and the potential complexity of the analysis. I will share a little secret with you - you do not need to be a statistician to use or interpret web analytics."
  Amen. Leave your T-tests at the door, and Omniture out of your budget. A couple hours with Excel will teach you a lot, even if you're numbers-averse.

Many thanks for writing it, Hallie.