I may be braking rules here, but I consider console and handheld RPGs to be different beasts, so I will pick two games.

Consoles: Mass Effect 2

Yes, I was tempted to go with the first Mass Effect or maybe even Fable II, but to me, Mass Effect 2 is the first game in recent memory to actually make me feel like I was (hence playing the role) of the main character. Yes, it's true that the story is nothing special and quite less grand scale than its prequel, but the character interaction, decisions you must make, implementation of save games from the prequel, and amount of dialogue in the game in general leads me to wonder how painstakingly crafted this game was.

Handhelds: Chrono Trigger DS

This is coming from someone who had never played the game before, but there is still something very special to me about Chrono Trigger. What exactly makes this game special is really hard to put my finger on, I guess that it just does everything so well. It's characters are memorable, and all your companions are quite likeable. The story is simple, and that's the way I like it (uh huh, uh huh!). I have an extremely difficult time following JRPG storylines, particularly the ones that don't have some sort of journal within the game keeping me updated, but that's not a problem here. The battle system, for being as old as it is, is one I can actually see being used in games today, and that's really what makes this game so nice for me. I completely missed this game on the SNES, and yet, it doesn't feel like a remake to me at all, and to me, that's probably the best complement you can pay a remake (especially one going on 15 years old).

Note: I am moving on to Dragon Quest soon, so this opinion could change.

Pokemon Soul Silver. A great remake of a classic game, which was one of my favorite games growing up. It even let you listen to the classic music which, I found to be great addition.

I know you asked for the favorite but I couldn't decide between Radiant Dawn, TWEWY and Devil Survivor so I'm going to write my favorite thing about each game.

Fire Emblem: Radiant Dawn. Definitely the character design and the the difficulty.

The World Ends With You. The gameplay, because its so damn fun.

Devil Survivor. Very interesting story and different paths to follow.

Pretty sure my favorite RPG isn't out yet. Its most likely going to be Dragon Quest IX (DS), Lufia Estpolis (DS), The Last Story (Wii) or Dragon Quest X (Wii).

the world ends with you. Combines the collecting aspect of Pokemon, with very fun and challenging combat. I really liked the story although it was at times cheesy. The main quest is pretty long and never felt boring. Some of the bosses were painfully annoying though, and some of those damn pigs! Oblivion/fallout3 are tied for second, because of the huge amount of things you can do in both games.

It was Demon's Souls until a week ago, when a got the AMAZING Yakuza 3

Why?

-Never have I played an RPG where you get laid after taking a girl out for Sushi
-You can get raped by drag queens
-you can literally sup-lex a guy's back onto a walking rail, stomp on his face, and throw him like a bowling ball into a group of enemies.
-You can sing Karaoke and play baseball! nuff said.
-You can get drunk and roam the streets, you even have access to drunken moves if you encounter enemies while drunk.
-You can dine at fancy restaurants or get an ice cream cone around the corner.

... i got to stop. This has inspired me to write a thread about how awesome this game is!

mass effect, oblivion, and fall out3. dont make me choose

Mass effect: story was amazing and fun to get in to

oblivion: a world full of green and life with a lot to do in the game

fall out 3: a open wasteland to just do what you want

So.. with Valkira Chronicles in the OP it appears you are counting SRPGs.

Honestly, even though it's a BIIIG stretch I'd have to go with Borderlands... which is saying something considering how much more I tend to favor RPGs in general over shooters.

Reason being... it was fun... and somewhat unique. The story was god awful, but the leveling up was the most fun i've had in a game for in a while.

Fire Emblem comes to a close second. Tried and true gameplay and a great story.

Valkria Chronicles is up there but... the characters all leveling up together hurt it from a gameplay perspective in my eyes...

While the wide varied characterization of the empire hurt it in a lot of ways. It seems like they both play the "Empire are evil bastards card" and the "The empire is just like us" card... to varying effects and it just conflicts.

On the one hand the troops are supposed to be hesitant, yet on the other... they're shooting down peasants... which offers no tactical advantage and holds no point.

While as was mentioned in the OP via example... the holocaust tip-toeing was kinda bothersome. They made an analog yet one that didn't come off particularly strong or powerful. It was nice to see Rosie's development, but outside of that... they didn't really do enough with it.

The game had a lot of strengths... like how it handled gay characters and such... but also a lot of weaknesses.

It was Valkyria Chronicles up until yesterday when I finally found a copy of Yakuza 3 at Best Buy.....I've haven't played 17 hours of a game in 2 days in I don't know how long.

*is waiting patiently for someone to say FF XIII*