I'm a big fan of Terry Pratchett, and he doesn't use chapters (mostly). Are there any other authors who tend to not use traditional chapters or chapters at all in novels?
I read an interesting novel by Lionel Shriver called We Need to Talk About Kevin. This book didn't have any paragraphs at all, it was a series of letters written from the main character to her husband.
Although this sort of technique doesn't work for the vast majority of novels, it can be a good way to keep your readers reading. Short blurbs of information (like letters or journal entries or even just short paragraphs) are a good way to make you lose track of time when you're nose deep in a good book. It also makes it easy to stop reading when need be, without the pressure of getting to the end of the chapter in a hurry.
Gilead by Marilynne Robinson does not use chapters. Sections are broken with an additional line or two of whitespace. The entire pace of Gilead is intentionally slow, inviting you in to the mind of an aging, dying man. The lack of chapters helps to keep this slow pace along with the beautiful description.
Home by Marilynne Robinson uses the same technique, but in the last case the lack of chapter breaks encourages you to continue moving through the story because of the use of more dramatic tension.
To the White Sea by James Dickey has no chapters. It has been variously described as a first person poem in novel form as well as harrowing. The story of a white man's escape from Japan in WWII.
The effect of not having chapters on a novel can, as the three books above show, be various. In some cases it will slow the book down. In other cases it will grip the reader and keep them turning the pages. As long as your prose, plot, and characters fit your reasoning for the unique pacing a book without chapters provides, it can be a great decision.
David Gerrold has always shied away from numbering chapters; he just puts in a section break and keeps writing. Of particular note are his books When HARLIE Was One, The Man Who Folded Himself and The Flying Sorcerers, his collaboration with Larry Niven; all of these have no numbered or named chapters, just chunks of text.
Another is Alternatives to Sex. It has chapters, but they're not what you'd consider traditional chapters -- much shorter and they broken by the shape and pace of the narrative.