Buying an XBox 360 or PlayStation 3 is largely a matter of
preference. Unless you want to play with certain friends that have
a console, then you must purchase there brand of console or both
the PS3 and Xbox 360. The same is true about exclusive games. If
you want to play the Halo series or Kinect Games you need to
purchase the Xbox 360 with Kinect. If you want to Play Uncharted 3
or other PS3 exclusive games or Move Compatible games you need to
purchase a PS3.
The Xbox 360 4 GB is not comparable in function as a PS3 game console or with the other Xbox 360 models because of the small harddrive it is $50 cheaper than the 160 GB PS3.
PS2 games can not be played on any model PS3 currently available for sale new or in production. Older PS3 models that play PS2 games may have been repaired many times and can cost as much as a new PS3
The only PS3 that can play PS2 games with what is called backward compatibility is the earlier models with 4 USB ports (See PlayStation knowledge center related link) You can not purchase any hardware or software or make any changes or updates to allow any PS3 with 2 USB ports including the new PS3 SLIM model to play PS2 games. (This does not include thespecialPS2 titles sold at the Playstation Store to play on the PS3 that will no longer work on a PS2. )A short history of the PS3 ability to play PS2 games follows:
The very first 20 GB PS3 could play PS2 games and so could the 60 GB model that was released with it and those machines are called the first generation PS3 Models. The second Generation PS3 model were the 60 GB Model and the 80 GB model and while they could play the PS2 games it was based on Partially software-based PS2 emulation while the earlier models were Hardware-based PS2 emulation. These 1st and 2nd generation PS3 models all included 4 USB ports and also had Flash memory card readers. The 3rd generation of PS3 models had the 40 GB, the 80 GB, and the 160 GB Harddrives but only 2 USB ports and do not play PS2 games with backward compatibility. The fourth Generation of PS3s are the 120 GB and 250 GB PS3 slim model which do not play PS2 games with Backward Compatibility. All PS3 models play PlayStation 1 Games and do so through software emulation. (Wikipedia related link)
When the PS3 was first released it was released with only a dozen or so PS3 game titles and they needed the PS3 to be able to play PS2 games for it to be marketable. The original PS3 was sold at a loss of over $300 even though the selling price for the 60GB model was $599.99. The price has dropped since that time because of many PS3 model changes and also reductions in production costs. The current USA retail price for the PS3 320 GB model is $299.99. The number of games has also increased to over a 1,000 making the question of which consoles has more games much less important than it was a couple of years ago. See related link on PS3 games.
You cannot play PlayStation 3 games on Xbox 360 or Xbox 360 games on PlayStation 3 and neither games can be played on a PC or the Nintendo Wii. You can not play an online game against someone using a different type of console as they are separate networks besides the games not being compatible. A PS3 can only play online games using the PlayStation network and the Xbox 360 can not play on it. Playing online against friends is one of the main reasons some people have purchased both the PS3 and Xbox 360.
PlayStation 3 does have a problem like the red ring of death and it has been named the Yellow light of death and YouTube videos are available for both of these problems on related links. It has been claimed by both the Manufactures that the problem has been corrected. The new models have lower power consumption and do not run as hot. The newest PS3 uses less power undermaximumthan the older models used for thereminimum. The PS3 systems never had high failure and run much cooler now.
The PS3 markets itself as more than a Video Game player and plays Blu-ray movie disc and upgrades the DVDs to near HD quality when connected to a HDTV with a HDMI cable. It will Play according to this ad quote "Share your music, photos and videos with friends and family from one convenient location. Designed to support all major codecs, you can play virtually any digital file as well as Blu-ray Disc movies, DVDs, CDs, or connect a compatible USB device5 to the PS3 system's hard drive and enjoy your photos, videos and music anytime you like."
Links concerning the Xbox 360 elite have also been added under the related links