Two major missteps at launch and for the first 1-2 years really stalled PS3 sales:
1) PRICE. $599 was just too expensive given the market competition.
2) Sony's total arrogance over defending the 'value' of the price point and refusing to admit that PS3 sales were lagging.
I'll add to the arrogance item the bit about the non-rumble in the sixaxis controller. Sony played a game of chicken with Immersion (to license the rumble tech) and lost, then tried to argue that rumble was sooo "last gen" and nobody really wanted or needed it anyway.
Sony have really turned things around in the past 2 years (PSN disaster not withstanding) and has proven that with the right price point and great lineup of 1st party exclusives the PS3 -can- beat Xbox360 in sales. Unfortunately the 360's 1-year head start (with no competition) and the millions of RROD'd consoles that were 're-bought' (before MS's replacement policy) have kept the PS3 in 3rd place lifetime to date sales, but only by a very thin margin: 3.4million consoles worldwide.
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