The problem with vertex animation is that it uses way too much memory. When we export our character models from bones to vertex animation for Gamestudio it is way too big. So I would recommend bones for as much as you can do with it. When you really need facial animation then morph animation are a good alternative and as far as I know, morph and vertex animation are the same technique. But I also know some games using bones for facial movement, though morphs are more common.

But this also means: Ratchet is right that you can create a prototype easily most of the time with bones, morphs are often only needed to create the additional details in the end. But really, a pulsing heart or a facial move can be done with bones as well.