The PS3 came in too expensive. I had a new PC, there was nothing exceptional enough about the PS3 to make me want to spend that much money on one.
Then when they started lowering prices to a level I could actually justify paying, they removed the backwards compatibility with the PS2. Deal breaker for me. I have some PS2 games and no longer have a PS2 to play them on. And NO WAY will I pay for a PS3 which won't allow me to play my existing games as well as any new ones I choose to buy. I'm not buying two 'new' Sony consoles when one should suffice.