Packet sniffing can occur anywhere on your broadcast domain.
(I think thats the correct term. correct me if I'm wrong.)
If you are attached to a switch, you can only sniff traffic going to and from your single host.

If you are attached to hubs, you can sniff any traffic that passes by.

If you want to sniff traffic while using a switch... look into ettercap.

The reason for this is:

Hubs will pass any traffic going by. They have no idea where the destination host is... so it'll just send it everywhere.

Switches will only pass traffic destined to a certain MAC on the switch port. They are smarter than hubs.