I love how people are still saying "it's all about the games" as if that's some sort of indisputable fact. Are you folks blind? If that were the case, the 360 wouldn't be the worst selling system (including handhelds) on the market this year.
Anyway, the point of the article was about Microsoft's lack of identity. There's nothing about the system that really sets it apart far enough from the other systems. It used to have shooters on lock down, but Sony has done a good job at catching up. MS used to have the advantages of Live, but that has again mostly diminished. On top of that, they've been obsessed with turning Sony exclusives into multiplatform titles.
What the author is trying to say is that MS has lost a lot of momentum in the market b/c they're shooting for parity and mediocrity rather than shooting for the moon and innovating.
On the other hand, Sony has distinguished itself by marketing its system as the most powerful machine money can buy, by building the PSN up as a portal for very unique gaming content, by trying to reach a mass market audience with ambitious content that has never before been seen on consoles (LittleBigPlanet and Home), and by including Blu-Ray, they have turned the PS3 into what many would say is the ultimate media player money can buy.
Microsoft used to be perceived as the gaming company at the very front of innovation with its push for First Person Shooters through Halo and its huge lead in the online arena. Those are the two things that built the Xbox brand, but now that's old news and MS has done little to keep their lead in those areas or to move forward into new innovative arenas. That's what the article is getting at.
My Top 5:
Shadow of the Colossus, Metal Gear Solid 3, Shenmue, Skies of Arcadia, Chrono Trigger
My 2 nex-gen systems: PS3
and Wii 
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Prediction Aug '08: We see the PSP2 released fall '09. Graphically, it's basically the same as the current system. UMD drive ditched and replaced by 4-8gb on board flash memory. Other upgrades: 2nd analog nub, touchscreen, blutooth, motion sensor. Design: Flip-style or slider. Size: Think Iphone. Cost: $199. Will be profitable on day 1.







