The perfect Analogy IMO - The Wii is the MX5/Miata of gaming consoles.

[Bodhesatva]

I think you can pick a ton of different car models.

If we were to be general, I think the 360 and PS3 could be compared to American muscle cars in the 70s. Compared to their Japanese competitors, these cars made by Ford and GM (Mustang being the most famous) had much higher top speeds and acceleration. The Japanese counterparts, what we today call Sedans, were smaller and technically inferior.

However, the automobile industry is not a performance industry, but a transportation industry. By focusing on top speed and acceleration, American automakers overshot the needs of the market. And simultaneously, the Japanese cars had significant advantes due to their low performance; they were less costly (both to purchase and repair) and consumed considerably less fuel. In addition, these Japanese cars were much more profitable to produce.

Fast forward thirty years, and GM/Ford's seemingly impenatrable dominance is in shambles. Toyota has been making profit this whole time, slowly growing their financial base, and slowly eroding the market share of the performance-minded American competitors. Now, Toyota is the largest auto maker in the world.

To expand this idea more generally, it's important for manufacturers in any industry to not get enamored with the technical aspects of the products they design. The video game industry is not a technology industry -- it is an entertainment industry.