What is the advantage of setting DataContext in code instead of XAML?

You can (maybe in 2009 you couldn't) get the best of both worlds by using the d:DataContext attribute. You don't need any of that ViewModelLocator craziness if you're not ready for that yet :-)

First make sure that you have the following XML namespace defined in your root element:

xmlns:d="http://schemas.microsoft.com/expression/blend/2008"

Then you can add the following attribute to an element in your xaml:

d:DataContext="{d:DesignInstance IsDesignTimeCreatable=True, Type=vm:CustomerInsightViewModel}"

In your xaml codebehind :

    public CustomerInsightUserControl()    {        InitializeComponent();        if (!DesignerProperties.IsInDesignTool)        {            DataContext = new CustomerInsightViewModel();        }    }

Then in your ViewModel:

    public CustomerInsightViewModel()    {        if (IsInDesignMode)        {            // Create design time data            Customer = new Customer() {                FirstName=...             }        }        else {            // Create datacontext and load customers        }    }

Don't miss the IsDesignTimeCreatable=True or else Blend won't instantiate your class

I don't like the idea of having Expression Blend try to instantiate my data objects.

I set the DataContext through code where I am able to use Dependency Injection to inject the proper objects, services, providers or what else I am using to find my code.

Having it in codebehind makes it easy to inject the datacontext using unity.