Asking a group of gamers "Xbox or PS3" is like asking a group of car guys "Ford or Chevy." You're going to get a lot of different answers since both camps have their devoted fanboys. It's a complicated decision, especially now since a the Red Ring of Death and programming difficulties for both systems have largely been solved. So let's take a look at this from a practical standpoint to see which console you should be buying.
I don't have a lot to spend
Get an Xbox 360. The system retails for $199 but often goes on sale for less. In fact at the time of writing, old Arcade units are selling for $149 in advance of the Slim Arcade. The 360 also has a good library of discounted games since it's been around longer.
I don't have an HDTV
Get an Xbox 360. The Playstation 3 is really geared towards a high definition experience and it just isn't the same in SD. The 360 on the other hand is a good DVD player and games still look excellent in SD.
I want to use my system as part of a home theatre
Get a Playstation 3. The PS3's Blu-ray player is still one of the best in its price range. It also does an excellent job upscaling DVDs. Furthermore, it features built in photo and video editors similar to Apple's iMovie and iPhoto, making it easy to organize your collections. While media streaming features are a bit lacking, the system makes up for it with it's own video store. The PS3 is also somewhat quieter than the 360.
I play mostly online games
Get an Xbox 360. Xbox Live does cost money but offers a superior online gaming experience. PSN is good but still somewhat rudimentary.
I play mostly single player games
It's a tie. Test out some of the different games on both systems to make this decision. Both have an excellent line up of single player titles ranging from casual to hardcore.
I want casual and family friendly games
Get an Xbox 360. You really should be looking at the Wii in this case but the 360 does have a lot more family friendly games than it's competitor. Xbox Live Arcade has lots of great casual and family friendly titles for download. The PS3 on the other hand is heavily focused on intermediate to hardcore teen and adult gamers.
I already have a capable gaming PC
Get a Playstation 3. Most 360 games eventually get ported to PC, are available for direct download, and are usually much cheaper. The PS3 has an excellent line-up of exclusive titles that tend to be more highly rated than the 360's exclusives. The PC is also arguably better than both for online gaming. If you have a capable, modern gaming PC, there's absolutely no point in getting a 360.
I want to store a lot of stuff on my console
Get a Playstation 3. If you have a lot of videos and music to store, the hard drive can easily be upgraded. In theory, the PS3 can support up to 1tb with an external drive connected to it via eSATA, or up to 500gb for an internal drive. The PS3 doesn't use expensive proprietary drives like the 360 does. Consider it if you want to store a lot of HD videos or downloadable games locally.
I like to download games
Get an Xbox 360. The Playstation store is sorely neglected. There's a lot of DLC on there but not a lot of full games. The Xbox Live Marketplace has a wide variety of titles you can purchase.
I want to play foreign games
Get a Playstation 3. The Xbox is region locked, meaning certain games are tied to certain areas. Japanese games won't work in American consoles. The PS3 on the other hand isn't officially region locked. Sony could do it but so far hasn't. It's unlikely they will. Therefore, those Japanese games will work here. Many Blu-ray movies also aren't region locked, though some are. Therefore the PS3 might be a good choice if you're a foreign film buff.
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