Having owned both, I'd say without a doubt the Xbox is the better choice.
The way everything is laid out on the Xbox 'dashboard' compared to the PS3 is a lot better, and has a more appealing appearance to the eyes, not forgetting that it's a lot easier to use than the PS3 alternative.
Yes, the PS3 has a blue-ray player, but who cares? I can watch films on my dvd player in HD, and that's fine. I brought the Xbox for what it's meant to be used for... To play games :O
Even though you can generally get the same games on both platforms, it seems the versions that are on the Xbox get supported way more, with updates and patches etc as well. Also as above, you can't get Halo on the PS3, if you have played the Halo games, you will know what I mean when I say they are a must have series.
I have tiny hands, yet I find the Xbox controller waaaay more comfortable and ergonomic. It is shaped well, the buttons are placed well and are all easy to press. Whereas with the PS3 the controllers are tiny, and you pretty much have to clench your hands closed to hold it, which makes your fingers ache a lot. The buttons are placed okay, but feel cheap and tacky. The triggers on the back of the controllers are pathetic, the worst excuse for a 'trigger' I have ever used. It's pretty much impossible to hold them down for more than a few seconds without them slipping out of your grip.
PS Network is free yes, but you get what you pay for... As you pay for nothing, you pretty much get that. With the Xbox, yeah you pay £40 a year, which is a whopping £3 something a month (really breaks the bank!) but again, you get what you pay for. A huge online community, a stylish dashboard, loads of free content, un-frequent but generally good/major updates, and as people will probably mirror. More people who have the Xbox console play online compared to the small number of people (in my experience) who play the PS3. So you won't have to look hard for people you know to have accounts.
I'm 17, and when I play on Call of Duty, or Halo, or even GTA IV, the vast majority of people I play with/against are older than me, sure you do get the occasional kid who won't shut up, but that doesn't really bother me, I just mute them and carry on. With PS3, no one online speaks I swear, I suppose it's because they aren't stupid enough to have to fork out an additional £30 or so for a headset.
Anyway, just my 2p.