To expand on what point said...
On the 360 you can download/rent HD movies, TV shows, trailers, lots of media.  There's also arcade games, demos, game saves, expansions, map packs, and other new content for games.  You can also rip a CD to the 360's hd and use that as background music in games.
That's one advantage the ps3 has, you can use any hdd so it isn't expensive.
I would like the 120gig hdd also.  I've been renting HD movies.  It's still cheaper than buying a player and the disc.  A typical movie can take up to 4gigs of space.
Consoles aren't just for gaming these days, they are multimedia centers.