Living in small spaces

I've had this bookmarked for some time, maybe we even posted something about it before, but as we question how we live in cities (especially Melbourne with its sprawling suburbs of large houses), maybe we all have to be prepared to make more efficient use of living spaces.

This article from Treehugger shows some very efficient living spaces from Europe, which are all very well designed and probably expensive. I have seen some cheaper examples here in Melbourne of efficient space usage such as a friend who lived in a tiny room with a bunk bed, a desk underneath and shelves running around the room at various levels. It wasn't that pleasant but still, a good use of space.

What are your views on the efficient use of living space? Is it necessary? Would you be prepared to do it?