I think the competition should only be between Sony and Nintendo, so Microsoft should leave.
I had an Xbox, PS2, and Gamecube in the last generation and everytime I tried to get into any gaming in Xbox all I heard was "Halo Halo Halo Halo Halo2 Halo2 Halo2." Microsoft's world revolved around Halo, that I didn't like. Don't get me wrong, it's a solid game, but overrated in my opinion. Basically what I'm trying to say is; I'd rather have a killer catalogue than a killer app as Phil Harrison said. Sure, 360 has a good forecast this year, but not promising. Bioshock and Mass Effect look pretty and shiny but I can't help but to think the cons about RPGs. The main one being replay value. I like action games like God of War and "edge of your seat" games like MGS. I also like games like Socom online, which has plenty of replay value as far as online goes.
As far as online goes, I like Sony's approach A LOT better. Now, I know, "But the PSN is horrible!" or "Home is a virtual XBL, big deal, it's just a gimick." People need to think outside the box, no pun intended, and look into the main reason as to why Sony is taking a better approach. The cost? No, but free online gaming is a big reason. User generated content is the key. Sony is taking a Youtubeish/myspaceish approach to its online community, whereas Microsoft is taking a more regulated approach. If you don't believe me, take a look at the GDC 07 speech Phil Harrison made when he mentioned Time Magazine's You are the person of the year.
As far as innovation, I like the fact that Sony is not only contracting big developers, but they are also helping out the little people. Like the guy's who started off as a small team and made rag doll kungfu, now they are making one the biggest titles for Sony called Littlebigplanet. Like the guys who made that cheap little flOw flash game, now they made one of the main PSN games a bunch of people are addicted to. Sony is like a "share the love" company to me.
Not only that, but they don't force you into the next gen like Microsoft did. No, Microsoft abandoned the Xbox on the other side of the river, told people to "Jump in," and burned the bridge behind them. Sony, on the other hand, kept a multifrontal approach and kept the PS2 alive without forcing people to get the PS3. Sony emphasizes long term quality over trends. Microsoft is most likely going to come out with their next Xbox in only 5 years. Dude, we just barely started this generation and you're already going to shaft us in 5 years? (Sounds like Windows.) Sony and Nintendo are going to be forced to come up with their next systems to compete, and it ends up having to force the other two companies to almost shaft their users.
I'm sorry, Microsoft has some good people in its payroll, but for the most part--they got "MONOPOLY" etched into their eyes. They should just stick to PC gaming if you ask me. I truly don't know what told them to invade the console market in the first place. Bill Gates doesn't even want foreign competition, I can't imagine having only American games. I praise Sony's 3 continental support over only North American games. So, Microsoft should go.