XBOX Live has many times more content for download than the PSN.
XBOX Live has background downloading for ALL content, and even allows downloading when the console is off.
XBOX Live features chatting, video messages, invites, regardless of what your friend is playing.
XBOX Live tells you who's online, what they're playing, what level they're playing on, etc.
XBOX Live is broken down into communities, (recreational, underground, etc.) so that a casual player doesn't go head to head with a video game grand champion unless they choose to.
XBOX Live has scheduled family nights, girl gaming nights, tournament nights, and other event nights (www.xbox.com/primetime for more details).
XBOX Live has downloadble stratagey guides, documentaries, and other non-gaming, but gamer culture related content available for download, (and a handfull of quality free games on XBLA).

It has a ton of other features, such as PC interaction, instant messaging, and such, but I think that the PS3 offers many of those features.

wait,you can do in-game video chat?

Also, I know it's well designed, otherwise people wouldn't be paying $50 to use it. ;)

Hopefully I can elaborate a bit, download content is MASSIVE. XBox Live has incorporated Music Videos, Television, Movie Rental, and Arcade Games, I can get Anime for heaven sake. PSN may have this but at 1/100 the content. You can customize your XBox Blades with downloadable artwork based on movies, games, television ect, or just upload pics from a thumbdrive. They release at least 1 Xbox Arcade game a week. I have 57 games on my XBox Live Arcade and thats just scratching the surface. They have even begun including original blockbuster XBox games for download direct to your Hard Drive. I mean, you have an XBox360, you should see how massive the download community is.

For gaming you have gamercards and achievements tracker rivaled by none. Yes, I know the new trophy crap Sony is putting out, however, all my games have been tracked since the beginning. I dont have to go back an play Call of Duty 3 or Dead Rising AGAIN, or Perfect Dark to get the stats I have already earned. They are out their for everyone to see, since DAY 1. In game chat voice/message is unsurpassed outside PC gaming. Their are added mute features, so yes, you dont have to listen to the 12 year olds screaming at each other if you so wish, you can just communicate with your buddies and thats it. The entire argument regarding, "But the community in XBox is a bunch of crying teenagers" gets real old, because I will be 30 in 6 days I nothings more enjoyable than carrying on adult conversation with my Marine Co-Workers while destroying the competition (12 year old crybabies) in a Halo3 match. I dont mind paying the fee, I doesnt even dent my pocket book. My wifey may complain, but who cares, she's not the gamer, I am.

This is not a knock on PSN, far from it. It is free, but with free, comes certain sacrifices. If anything having a free community to fall back on for your Sony Rig is great and an even better reason to keep XBox Live. If you had to pay for both, I could see you making a comparison, but if you want to sacrifice the games you are playing on the 360 online by not paying XBox Live, cough, GEARS 2, that is your choice, and depending on your circumstance, it could be a good one. I for one think that XBox Live is a better on-line service (MY OPINION BITCHES). It has been beat to death, over and over, and will continue to be beat.

Now, comes the countless copy and paste comparisons while each group fights for superiority. Yes I called it!

IMO it is better for a series of reasons which have already be posted in response to this thread.  One thing to note is that certain XB games do have dedicated servers and others use peer networking.  For example, Front Lines Fuel of War has dedicated servers while COD4 uses peer networking.

From my understanding, if it is a 3rd party title it is up to the developer/publisher to provide the server architecture. 

For a good article on why dedicated servers are not viable for certain games, check out this link.  http://www.bungie.net/Forums/posts.aspx?postID=8455638 

XBL points.  They're just like Wii Points and PSN cards--basically, you use your credit card to add points to your account that can be used to buy stuff, like XBLA games, movie rentals, or DLC.  I don't see how that one's so big, though, because PSN and Wii can do that, too...

@Retrasado:

Not in-game video chat (I don't think so, anyway), but dashboard videochat, as well as talking to friends who are playing different games than you.

It also keeps track of who you played against, the friend of the people you played against, every game that player has played, who was better at the games both of you played against, who has the higher gamerscore, which achievements that person has, that you have or haven't gotten, who their friends are, and where you rank in a game, compared to the rest of the world. It's the little touches that make XBOX Live better. Also. it's easier to stalk your friends!

EDIT: nvm. read post wrong..

You can video-chat in some Arcade games like Texas Hold 'em, Uno or Warlords (and some more, but i don't know all of them)

But not in regular games like CoD4 or Halo3. At least I haven't heard of it. But I think you can video-chat (crazy word by the way) with MSN all the time. But I am not sure about this one. The 360-camera also works as a regular webcam.

Basically, currently both services have their pros and cons.

I like the PSN store and its game content better (Super Stardust HD IMO is the best effort of the games not being distributed on disc as well), I love the dedicated lag free servers for many games and best of all you can play online free of charge. The Singstore is also very cool:

http://uk.youtube.com/watch?v=y5YScW9V460

I hope a future music (-video) and movie downloads service will be similar on the PS3.

For developers the PSN provides far more flexibility, however integrating Microsoft's pre-baked Live functionality is easier.

Live advantages like in-game messaging, achievements (and OS features like custom sound tracks) should be dealt with soon by confirmed firmware updates. For example [edit]background downloading[/edit] support was also included through 360 firmware updates.

IMO achievements and custom sound tracks have been a bit overhyped. For many games sporting dynamic music like Uncharted: Drake's Fortune it does not make sense at all. For other games like Super Stardust HD the feature was added by the developers themselves, although nice for this sort of game I haven't used it at all. If it was important to me, I would have turned down the in-game music volume and use my audio system.

Gamerscore is IMO boring as it has little to do with actual skill, I am more an advocate of highscore rankings and potentially trophies for finishing games in various difficulty levels. A trophy room can be cool, but I am not really anticipating this much.

Home as a whole is IMO the most interesting and promising new development, which should greatly expand the social aspect of the PS3. This I highly anticipate!

IMO don't expect too many 360 firmware advancements, its 16 MB firmware flash memory is full, the PS3 has two 128 MB firmware flash memory chips which are largely empthy, Sony was planning ahead.

PSP remote play and connectivity also seems cool, but I don't have a PSP (yet) to try this.

whaa??? XBL gives you easy access to other people's friends lists???!!!! Wow. maybe I should get a 360.... :P

Edit:

Now I'm definitely getting one...... ;)