Placement of Mirror Lighting in Bathroom

You want some diffuse lighting above and/or next to the mirror. You can't just have recessed lighting pointing down. You'll look awful. Some recessed fixtures to light the room itself are fine. Hudson Valley Lighting makes many examples of what I mean: http://www.hudsonvalleylighting.com/listProductsByCategory.aspx?CategoryID=Bath%20And%20Vanity

Personally I prefer sconce fixtures on either side of the mirror (or one fixture above the mirror) PLUS ambient lighting from the ceiling (like a flush-mount fixture). I do not at all like recessed lighting anywhere, especially in bathrooms--it is always too harsh and severe. Also, forget 'vanity' lighting (as seen in classic makeup stations)--it never reads right, especially if you're planning to use the area to apply day-to-day makeup.

By the way--if you are absolutely married to the idea of recessed lighting above the mirror, then by all means PLEASE incorporate strongly lit sconces on either side to combat the shadows that will be cast by the recessed fixtures. Doing this should cancel out any ill-effects from the high-hat light.

We usually use sconces above the mirror, recessed throughout the rest of the bathroom

I disagree that recessed is "always too severe." We used 4" mini-type recessed with bulbs that have good diffusers. There is one in the small main area of bathroom and another in the shower (waterproof version). The calcatta gold marble, white fixtures, mirror and other surfaces reflect the light enough that the light is fairly diffuse and the room well lit. The over mirror light has four 40 watt bulbs behind frosted glass and it removes any shadows on the face. All are are dimmers. Light is perfect. I should note there is a small shower window too, adding to the lighting during daylight.

I still howl whenever I recall a line I read in Architectural Digest: "Overhead lighting makes a baby look forty!"

What most people forget is that overhead lighting is the foundation--just a start. Accent lights, task lighting, and lamps/sconces/etc are also required. That said, those recessed lights that looked like coffee cans stuck up in the ceiling from the 1970s are always--ALWAYS--wrong. From my point of view, so is track lighting virtually always wrong--but that's another story.

Agree with Kyle.

Recessed lighting should enhance the PRIMARY lighting, which is directly above the mirror, shining light into the face.