Regarding dedicated vs. P2P servers:
The vast majority of console games (on any platform) use peer-to-peer servers, which simply means they make one player run the server. Game servers are not processor-intensive things at this scale... basically all they do is stream out game data to 12-16 clients, and receive incoming player input streams. And they have some code to keep everyone synchronized.
There are a few PS3 games that use dedicated servers... I think Resistance is one, and Warhawk is another. But you're dreaming if you think every online PS3 game uses dedicated servers... few game developers have the money or even expertise to maintain high-availability game server networks capable of serving thousands of simultaneous customers (realistically, only the MMO folks can justify doing that.) And you're especially deluded if you think game developers will do it for free. Home will use dedicated servers, but they have a business model that provides for that -- they will sell you lots of useless crap, and if collectively, you don't buy enough useless crap, they will shut it down.
Having said that, dedicated servers and P2P servers both have their pros and cons. With dedicated servers, you are typically at the mercy of the server operator with regard to game settings, mods, player limits and yes, lag. If your dedicated server is located in a tiny data-center in western Mongolia, piped out through a fractional T1 routed through six different African countries before it gets to you, then your gameplay will suffer no matter what. Of course, dedicated servers generally won't be that bad, but bad servers do exist, and are more common than you might think.
Also, there are only a finite number of dedicated servers out there. A reasonably popular PC game might have maybe 1000-2000 game servers worldwide. Exclude high-ping servers, buggy servers, servers with no cheat protection, etc. and you may have a selection of around 20-40 servers on which you'll have a good experience. Of those, a handful may be running the game settings you want. And if your game of choice loses popularity, then all the servers will disappear and you'll be SOL, even if you want to just want to get a quick pickup game with your friends for old times' sake.
The flipside is those server machines are dedicated - their entire processing power is used to run the game servers (because most "dedicated servers" are actually running several game server instances at once.) So they can serve more players per server. And they are usually located in data centers with big, enterprise-grade bandwidth, so they aren't subject to the vagaries of residential internet connections (which is what causes the lag associated with P2P servers.)
With peer-to-peer servers, you get to control the game settings, and if you want to get a group of friends together, it's easy to pick the guy with the best connection as the host. Many games do that automatically; the "host" is simply the person who gets to pick the game settings. The only real downsides to P2P are that the servers can't support as many players both from a processing and an upstream bandwidth standpoint, but as both processing power and upstream bandwidth improve, pretty soon those disadvantages will be eliminated as well. But then most console games are designed around those limitations anyway. The other disadvantage with P2P is the host could potentially muck about with the game session, introducing lag or cheating, but Xbox Live on 360 has made that exceedingly difficult, and cheaters get Avoided or Reported.
Which brings me to why I think Xbox Live's premium service is better than Sony's free service; namely that Xbox Live feels like a service in that there are people at Microsoft who are working to provide you with a great game experience. It's tough to describe in words, and it doesn't come out much in a bullet-point list of features, but once you play it and dig into it, it all becomes clear. The way everything fits together to form a consistant whole, the way it feels like you are constantly connected, the way Xbox Live is just there, all the time, making things better.
For example, cross game invites. I'm in game X, someone invites me to game Y, I swap discs and I'm taken to that person's game instantly. Or the way Achievements get uploaded to the network so that everyone can see them across sites like Mygamercard.net or 360Voice.com. Or the way TrueSkill monitors your skill levels independently in every game while using the same ratings scale across all of them, so you know that anyone with a TrueSkill rating of 45 in a game must be a master at that game, no matter what game it is. Or the way Halo 3 modifies the Xbox Guide to let you see a player's Service Record, Party Status or File Share when you're viewing his or her Gamercard. Or indeed, the Gamercard itself and the information it reveals about every single player.
Indeed, having an Xbox 360 Player Profile that isn't linked to Xbox Live (whether Silver or Gold) is almost like having a disability... it's not just about online gaming, it's about that feeling of connectedness to an entertainment service. And it's well worth $50 a year.
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