The Xbox 360 is no slouch when it comes to graphics either, but its real selling point is Xbox Live. The Playstation Network (PSN) has a long way to go before it's up to par with Xbox Live. Although PSN is free, Xbox Live still has more subscribers, which says a lot: people are willing to pay for quality. Until PSN has cross game voice chat, among other things, Xbox Live will continue to lead when it comes to multiplayer games.
Technical prowess doesn't always sell game consoles. SEGA learned this with the Dreamcast, as did Nintendo with the Gamecube, and Microsoft with the Xbox. The Playstation 2 was the weakest of the three last-gen consoles, yet it sold the best, and in most peoples opinion had the best library of games. The Playstation 2 continues to sell well, and the Nintendo Wii is pretty much a joke in the graphics department compared to the Playstation 3 and Xbox 360, so it's become quite apparent that better graphics aren't a huge selling point for gaming consoles.
Another strike against the Playstation 3 is the general publics refusal to purchase high definition television sets. Blu Ray is an excellent format to watch movies on, and completely trounces DVD if you have HD, but without an HDTV, it's not really worth having a Blu Ray player. Most people would see little difference between a DVD and a Blu Ray on a standard definition TV. This is probably the reason that the inclusion of a Blu Ray drive didn't do for the Playstation 3 what the inclusion of a DVD drive did for the Playstation 2. The transition from VHS to DVD was a lot easier for most people with a modest income. You weren't required to buy a brand new television set to get the most out of DVDs. This is the downside to Blu Ray. Blu Ray is one of the main selling points of the Playstation 3, and as it stands, DVD is good enough for most people when it comes to film.
If Blu Ray movies become more popular, then this would no doubt benefit the Playstation 3 as well. People may use it as an excuse to buy a Playstation 3, because what is the point of buying a stand alone Blu Ray player for a little less when they could have a gaming console, and Blu Ray Player?
Developers have already shown that Blu Ray is useful when it comes to video games. Metal Gear Solid 4 took up a little over 30GB of a 50GB Blu Ray disk. A DVD has 9GB of storage available, so Metal Gear Solid 4 probably would have released on 2-3 disks if it were on DVD. To people that have a large interest in the progression of video games, Blu Ray seems like it should sell PS3s with relative ease, but to the average gamer, Blu Ray doesn't offer enough over DVD to warrant the purchase of an HDTV, and a Playstation 3.
The Playstation 2 had a modest online community that primarily consisted of SOCOM fans. Apart from that, the Playstation 2 was well known as a single player gaming machine. The SEGA Dreamcast may have pioneered online gaming with consoles, but Microsoft grew it substantially with Xbox Live. While online multiplayer may not be for everyone, it is certainly very popular among the majority of gamers. It's almost impossible to recommend PSN over Xbox Live, and this is a major selling point for the Xbox 360. Cross game invites, and cross game voice chat, are two features that Xbox Live holds over PSN. Most people want to socialize while they play their favorite games—and love to play with their closest friends—and as of right now, Xbox Live is the best place to do it.
One of the many things that made the Playstation 2 so popular last generation was the amount of exclusive games. Games like Devil May Cry 1, 2 and 3, as well as Final Fantasy 10 and 12 were exclusive to the Playstation 2. This just isn't the case any more. Almost all of the exclusives for the Playstation 3 are developed by first or second party developers. The third party loyalty that the Playstation 2 had is a thing of the past. Most third party games that come out now are released on both the Xbox 360 and the Playstation 3. This doesn't help the Playstation 3 to differentiate itself from the Xbox 360, which makes consumers question why they should buy the more expensive Playstation 3. If they're not interested in Blu Ray, then the only real selling point is the first or second party exclusives.
Better Graphics and Reliability
The Playstation 3 is an excellent machine. As game developers continue to get used to developing games for it, the quality of games will increase. Depending on how much longer this generation lasts, gamers may really see the Playstation 3 pull ahead of the Xbox 360 in terms of technical prowess and graphics. Games like the much anticipated Killzone 2 look amazing, and judging from early reviews, and previews, it plays almost as good as it looks. Reliability is another factor that may help the Playstation 3 in the future. With warranties expiring on the Xbox 360s, gamers might see the Playstation 3 as the safer choice, despite the superior online service of the Xbox 360. Granted, new units of the Xbox 360 are supposedly more reliable, but that has yet to be proven.
To sum up, the Playstation 3 has better graphics, and the Xbox 360 has a better online service. If you're a single player type of gamer, then the slight edge in graphics and the reliability factor make the Playstation 3 look more appealing; but if you're hardcore about your multiplayer gaming, then the Xbox 360 is probably your best bet.