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I'm going to keep this as simple as possible to debunk every myth you've probably heard (and this comes from years of experience selling and servicing these units). Plasma or LCD? There is one simple secret that should guide this purchase aside from any consideration of other factors: name brand.
Essentially, plasma televisions are thin... that's the appeal. Essentially, LCD televisions are thin... that's the appeal. Would you like to know what TV type actually has the best image quality? You'd be surprised that it's the old CRT tube sets. They are phosphor-based which allows for exceptional color reproduction. That's why many of you can honestly say that you've had TVs in the past that look better than some of the ones you are seeing in the big electronics stores!

With plasma and LCD, which is better? Well, picture-quality-wise, you'd want to go with the one that is phosphor-based. Phosphor-based TV sets can reproduce the color black and actually make it look black-some TVs (e.g. LCDs) cannot physically make black. They can only make a very very dark blue. Watch a plasma and LCD side-by-side in the electronics store when the signal fades to "black" and you'll see what I mean. Sure, you might not notice this problem in your home when you don't have a hundred other sets to compare it to, but the color black is what allows you to see detailed edges (because of shadowing, etc.) Overall, this enhances the picture greatly. Hence, I point you to plasma. However, ever notice the fact that plasma televisions are almost like mirrors in the way they show every bit of possible reflection in a room? Well, since there is a very hot material inside the unit, the front must be made of glass to hold it in.
LCDs, on the other hand, are great with reflection because they have a plastic front (due to the fact that there is no phosphor inside). This is a great advantage if you have a lot of ambient/outdoor light shining into your room.
Now, you've probably already heard what I've just mentioned, but it is very important. Let's say you want better picture, so you get a plasma... well, if that pretty screen is full of light glare during the day, the plasma is only serving its full purpose at night. So... go LCD.
Currently, there have been many great strides made in the LCD world. Honestly, I don't think you'll still be seeing plasmas on the market after a couple more years. LCDs generally last a little bit longer, and the picture is starting to mimic that

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