This kind of setup is really common where I live. In fact, most newer homes are built with income suites (because housing is so expensive here it's the only way many can afford it). The suites get used a rentals, or the home becomes a multi-generational home with different branches of the family living in the 2 sections. A house with a good suite is basically a duplex, something that even MMM agrees is a good thing.
We've done both setups. When we first moved in we rented the suite. Now MIL lives in the suite. The big pro is obviously more cash in your pocket. I also like that the house is occupied nearly 24hs/day. Cons are increased noise, we need to be conscious of not making too much noise ourselves, increased wear and tear on the house, harder to keep utility bills down (offset by rental income), risk of getting a bad tenant.
We are much pickier about who we rent to than we'd be if the rental weren't in our basement, especially since we have 2 kids.