Yeah, the cut-and-stuff is one way to do it, but as mark mentioned, the preferable way is to fish the cable through the wall. This is *much* easier on an internal wall without an insulated cavity of course.

If you have a tall baseboard you can remove it and make a hole behind it - that way you don't even have to patch it to cover it back up again. On the second floor you'd have to drill through the bottom member of the wall (likely a 2x4 in NA residential construction). You'd do this also inside the wall - you can get crafty by using a flexible drill attachment.

What I did in my current place was to make a rather large hole just above the baseboard in one of my spare bedrooms. It's about 10" x8" and allowed me to manage a whole bunch of cables and a large satellite multiswitch. I covered the hole with a vent cover and it simply looks like an air-return vent. This enabled me to extract the multiswitch and pull up some of the wiring I didn't want left behind while selling the home.

The horizontal runs of wiring are in the attic and basement, so everything goes vertical between the first and second floors. In my new home we've had a conduit installed by the builder that runs in the wall from the attic to the basement so we can run cabling without the additional drilling and patching work.