Here's my take on this whole situation. I'll preface it by saying I'm a gamer at heart, and not a fanboy - I've primarily stuck with Sony over the last 12 years, having had exactly two consoles before last year - PSX and PS2. Then I finally took the big plunges and branched out to Nintendo and now Microsoft over the last year.
Sony definitely made the right move, IMO, by lowering the existing PS3 60GB model $100. That's one of the moves I expected them to make, and that's more than enough to motivate me to get a PS3. Unfortunately, the move came too late - I picked up an XBox 360 Elite two weeks ago, so the PS3 is now on my xmas wish list.
I had been saying to my friends over the last few weeks that Sony needed to do two things to increase sales - lower the price $100, and announce at least three system exclusive killer games at E3. Well they've done the price lowering, now it's wait and see regarding new content. But there's even more now I think Sony needs to do...
Having now played with the XB360 over the last week, I finally see why this system is so popular among the harder-core gamers. First, and absolutely the most important thing to me, is that out of the box, virtually EVERYTHING works right the first time. Getting online is painless, and with the Elite, you get a free month trial of XBox Live Gold. After a few hours of downloading the tons of free content available online, I realized I had been living in a cave when it comes to the online multiplayer experience. This is something that Sony clearly does not understand, and besides the price drop and lack of exclusive killer titles, is an area they absolutely must develop. They claim they're working on a virtual experience like XBL, and that it'll be free. Well, to me, that's just stupid - if people are clearly willing to fork over the $4 / month it costs to play online, maintain friends lists, have private voice and video chats, play in tournaments, etc, why pass up that opportunity?
As far as games go... it's been an amazing year watching title after title that had been exclusive to Sony get ported over to the XB360. Katamari, last I read, is now not only going to appear next on XB360, it will be _exclusive_ to that platform! And - the greatest coup d'etat since Sony brought out the original PSX (slamming the door on Nintendo's chances at a next-gen platform) - Grand Theft Auto IV seems poised for some system exclusive content on the XB360 as well that won't appear on the PS3. Honestly, I don't understand how the sales & marketing teams at Sony haven't been summarily _dismissed_ after losses like that? Gimme a break!
The bottom line is this: Sony did not get to market fast enough with the PS3, and so is a good year behind the XB360 in terms of games. They have the built-in Blu-Ray player, which helps, but honestly, people still buy these systems expecting to play games. If the games aren't there, then why bother? And... if the games _are_ there on a competing, equally compelling system, _now_, and at a _cheaper_ price, then why bother at all?