I don't think most people simulate their entire design using (say) Proteus like many students on edaboard seem to want to do.
I believe most people simulate portions, e.g. at a higher level, or using test data files. Similarly, I would breadboard portions,
but not the entire design. For certain types of circuits you may need to do a lot of physical experimentation (e.g. RF circuits) so there the
breadboarding (not using strip blocks of course) is an important stage.
At some stage, you'll want to move it onto a real PCB, and ordering a single 2-layer or 4-layer board is not so expensive, even for
someone designing something as a hobby. If there are any errors, they can be corrected with a scalpel and bits of wire, but
you should be at a stage where really if you're making more than a few (maybe 2-3) changes on a board, then you were probably not
ready for PCB prototyping. That depends on the complexity of the design of course. Usually I'm confident enough to order a handful
of boards, in case I want to make several copies, for tests, etc.
At low cost the PCB won't be electrically tested, but unless it is a super-complex design, I doubt that is worthwhile doing for a
first prototype.
Since the CAD files are something quite standardised, I've never had a bad experience with a PCB fab company for a prototype, as
long as the CAD files that you supply are correct. But then I tend to stick to 1-2 different companies that I'm used to.
Often they will send you an e-mail if they have any doubts, but don't rely on that.
Also, some people make up 'test board PCBs' occasionally, that are at a pre-prototype stage. The test boards may just have a handful of
components on them, to allow you to get familiar with a portion of the design, e.g. a new processor or DSP chip.