The PS3 is equaling sales of the 360 worldwide... However in the US it is severely lagging behind. The reason this is important, is because the US market drives the vast majority of games available to us here. Halo 3 no doubt gave the 360 a nice boost, and it should continue into the holiday season.

If the PS3 does not outsell the 360 this holiday (in the US), it will all be over but the crying. This holiday season is Sony's chance, and they know it, hence the new model and price.

I wonder if MS will follow up with yet another drop. They've got quite a bit of room in their margins yet to be able to handle another cut.

Price wars are good. I think both consoles came out overpriced for something that you still are buying $60 games for. Wii had a novel approach and a reasonable price point, both of which are why it's been so successful.