I buy yarn at both national retailers and local yarn shops. Here are a few of my favorites.
All About Ewe - Clark, NJ
Super friendly, great variety, large range of prices. Owners Lisa and Jesh are always happy to see their customers, and are always excited to hear about what you've been knitting. This shop is also way larger than most yarn stores, so it's never awkward to be that person that's just standing there feeling everything you come into contact with.
Down Cellar - Basking Ridge, NJ
A fiber lover's dream. This yarn "shop" is actually an entire house. Each room on the main floor is dedicated to something different: a fingering weight & sock yarn room, a sport & DK weight room, a worsted weight room. The main room houses bulky and super bulky weight yarns, as well as any specialty ones. There's a big table in the middle where there's always someone knitting. Upstairs is all of their sale yarn, and a room dedicated to a selection of fabrics. The only thing I would change about this store is make it closer! But then again, maybe I shouldn't wish that... and my wallet probably agrees!
Belladonna's Yarn Room - Cranford, NJ
Talk about a small shop! Donna wasn't lying when she decided to call this a room. The shop's official name is Belladonna's Yarn Room & Interiors, so there are some other non-knitting related things in there like small pieces of furniture. It's cramped and can be a little overwhelming, but she carries some beautiful, unique yarns. Plus, Donna is so nice, and has never failed to greet me by name when I come in.
Do Ewe Knit? - Westfield, NJ
This shop is very bright and open, with hot pink walls and white cubes holding all of the yarn. There are comfy couches where anyone you've dragged along with you can sit while you browse, and where you can play with the owner, Karen's, dog. I've been in there when it's empty and when it's filled to the brim with people, and Karen has always been curious about what's on my to-knit list.
DC METRO AREA
Looped Yarn Works - Dupont Circle, DC
Another beautiful shop.
NEW YORK CITY
I haven't frequented these shops, but here are a couple I've visited and liked:
A. C. Moore
JoAnn Fabrics & Crafts
These are the big stores, where you can usually still find good quality yarns but for economical prices. The yarns will be very different from those you'd purchase at a small yarn shop, but these stores are good for purchasing yarn you'll use for large-scale projects that require a lot of yarn, but which you don't want to spend a ton of money on.