They are directly competing with each other in the market however they are not always directly competing from certain consumer demographic points of view.
Of course, unlike previous generations of consoles there are a few other moving parts this time that make the situation more complex:
1) HD vs non HD and the impact of HD TVs
2) The impact of Wii in terms of the motion control and family gaming
3) The introduction of a new format (Blu Ray)
4) The growth of the videogame market
5) The current economic conditions globally
6) The skew of demographics by platform (let's face it few Wii owners are playing online FPS MP games, while few PS3/360 owners are sitting down with their families for a group gaming session) and the impact this has on genre game sales on each platform
All of the above can be used to skew things to your point of view I guess - but in the end all three players are trying to influence the market and gain the most sales/influence, they are all fighting for the best retail space, and they are all targeting multiple demographics (although as I said some platforms better target/suit certain demographics than others).
I think Fishy put it best though... fanboys want to chose when (and when not) this is the case but that's neither here nor there in reality.
Try to be reasonable... its easier than you think...
