A lot of gamers in forums say the Wii is not in competition with the 360 and PS3. But if that's true then why do Sony and Microsoft execs comment on the Wii so much? You don't hear Microsoft and Sony execs commenting about mobile games or online flash games as much as they do on the Wii, do you?
Microsoft and Sony execs are smart enough to know they are in competition with Nintendo.
Just several ways they are in competition:
1) Shelf space in stores and store advertisements
2) Third parties' attention and resources (when a developer makes one exclusive game for the Wii that could have been a game for the 360/PS3).
3) They are competeting for casual gamers. There is no doubt more casual gamers would be on the PS3 or 360 bandwagon if the Wii didn't exist.
4) They are competeting for hardcore gamers. Yes it's true. Not all hardcore gamers who own a console have a PS3/360. Many have a Wii60 or PSWii. They like what both have to offer. That $300 or so bucks they spent on the Wii and Wii games could have been spent on PS3 or 360 software.