Windows 7 is superior to vista, though vista is superior to XP for sure.
My only complaint about windows 7 is its memory handling. Since Microsoft got so much bad PR about the system requirements for vista (IE: If you have less then 3gb ram, its not going to run very pretty for an avarage user). They decided to address the issue with 7 and allow it to run with less ram.
One of the main reasons why 7 runs so much better on lower end machines is because of the way it handles items loaded into memory. Basicially - unless the program is ACTIVLY running, its stored in the page file - Even if you have enough ram to keep it loaded in memory.
That definantly makes it use much less memory - and makes the people with lower end machines super happy. However, it actually has a somewhat negitive effect on higher end systems. For instance, since minimized or idle processes are always stored in the page file - If I'm playing a game, then alt tab back to a webpage - it will take longer to alt-tab because FireFox is at that point stored in the page file rather then Ram.
Besides that little issue, 7 runs brilliantly with everything I've done. I do not have it myself, but I've messed with every model currently available for retail sale at bestbuy since its came out, (And i have to say, the HP Envy is NOT worth it). and really haven't run into any significiant problems. We've seen very few user generated issues, which is a testimate to how well designed the OS is. Unlike Vista, and very unlike XP, its fairly difficult for the user to easily change something that ends up bricking their computer.
@IAMAOM: Go with premium unless you want the xp virtual machine (Which also works pretty well) - other then that most of the features do not apply to a none-business consumer.
@Jerome: I havn't encountered a problem like that before - but nice to see your still around

XP VS 7
Why was windows XP better then 98?
Insert exactly the same things into "Why is 7 better then XP".
Especially in the realm of 64bit support, Networking, Security, and Multi core/Multi processor support, the difference between what windows 7 is able to do versus what xp is able to do is nearly as incomparable as windows 98 vs windows XP.
Also: I believe that the issue that's plagued gamers since XP (and most people don't actually know about) Is the limit on the OS's Virtual machine for games (Games run in a virtual machine - hence why a game can have a different resolution then the rest of the OS etc) has been corrected.
Previously it was impossible to assign more then 2gb of ram to any one game. This is evident when playing a game like supreme commander where the memory usage increases as more unites are created. You can put the game in window mode, open a memory usage analyzer (Or just task manager) And watch the games process slowly creep towards ~2048mb. As soon as it gets right around that number, it -will- crash, at least in XP and Vista.
Since game developers are aware of this issue - they have had to tailor their games to not utilize more then 2gb of ram at any one time, which hinders performance and I'm sure in some way or another limits what the developers can actually do.