For me it came down to the controller, and I was so used to the PS2/PS3 style that I stuck with that and got a PS3.
If were honest there is not a huge amount of difference between them in terms of graphics / visual ability. Maybe in the future this will change, but if you look at most recent games (GTA, COD4, Burnout, NBA2k8, FIFA08) then there is not that much difference.
The xbox has had problems with system failure, but if you buy a new one that shouldn't be problem (only be careful with 2nd hand systems).
In terms of exclusives there is not that much to pick between the two. e.g. On the one hand you have Halo 3 on the other MGS4, yeah there are a couple of niche games that will only be on one system, but most of the main games, CoD, Fifa, PES, GTA, etc will make it onto both system.
Basically, as people have already mentioned the main differences are:-
Online - Xbox better service but costs money, PS3 average service but free
BluRay - PS3 can play them Xbox can't (only a factor if you're a big fan of movies
Controller - For me the biggest factor, you need to try both and see which you prefer
Region free - PS3 can play games region free (useful if you do a lot of travelling to USA / Asia and want to pick up games earlier or cheaper)
Those are the main factors, to be honest if I were you I'd rent the Xbox and see how you find the controller, as that will be the key and that is a matter of personal taste, so no one can really say "this is better than that etc". I rented the Xbox and didn't like the controller at all so went for the PS3. If you find the Xbox's controller ok and are happy for pay for the online subscription (which does give you a better service) then go for the Xbox.