If you're looking to buy a whole new computer, the answer is simple: go ahead and buy a system preloaded with Vista Home Premium (not Basic) or a more advanced version (like Ultimate).
If you're looking to build your own system soon, I'd recommend building it with Vista in mind (see info about hardware coming up). Even if you decide to install XP for now for stability reasons, once SP1 or SP2 of Vista comes out you will surely wish to move on to Vista.
If you recently bought a new computer that included a free upgrade to Windows Vista, go ahead and take it. But be warned: read all documentation relating to the upgrade very carefully, and take note of the advice to follow about hardware and versions of Vista. For example, if you get a free upgrade to Vista Basic, that's laughable and you might as well stick with XP.
Now before I go into the final category of possibilities, let me explain why I say staying with XP can be a good option for some. First, Microsoft has pledged to support XP for many years down the road (at least 5 for sure), and it's in their best interest to do so. Many consumers will refuse to upgrade to Vista for cost, security, and value (features vs. cost) concerns for several years down the road. XP is now on SP2 with SP3 in the works, so it is a stable, well-known OS that has stood the test of time (albeit on a rough road that dealt it several hits). Bugs are already being found in Vista (as is the case with any OS) and Vista SP1 is already beginning to become an idea (if not a work-in-progress). For most people who already have the 2nd most recent version of Windows, it is typically best to wait at least a year after the newer version comes out before moving on. Here's why: a new OS requires from the user more money, more learning, possibly more hardware, and possibly more tech support calls - and definitely more time, initially at least. Most people would rather wait about a year for the new OS to get more efficient, safe, and user-friendly before adopting it.
Now to the core group to which the topic of this article pertains most: those who have an XP machine now and want to upgrade to Vista on this same machine.
First, decide which version of Vista you want. For many home users, Vista Home Premium will be the best choice. Home Basic sucks so don't even bother considering it - you're better off staying with XP than "upgrading" to Basic. Power users might want Vista Ultimate, which gives you all the Vista features possible in one release.
But realize, of course, that the different versions have different costs. Ultimate costs a couple hundred or so more than Home Premium (and Basic is comparatively cheap enough that just from that you can question its quality).
You also have to decide between the full version or the upgrade version of your chosen Vista release. I personally would recommend the full even though it costs more because it is far more convenient to reformat your hard drive (or use a new hard drive) and install your OS from scratch than to take an existing OS and upgrade it. There are less possible complications and it's a lifesaver when you just want to totally reinstall Windows (I do this about once a year just to have a fresh platform to build upon).
Whether you go the full or the upgrade route, you then need to look at some factors that pertain to everybody looking to move to Vista: hardware requirements/recommendations. Basically, Microsoft says that to run Vista you should have 1 GB of RAM, a pretty modern graphics card, and a decent modern processor (while there are other requirements, these are the most critical ones). Personally, when I move to Vista I want at least 2 GB of RAM (4 GB would be ideal), the 2nd or 3rd most powerful graphics card iteration on the market, and the most powerful processor I can afford. Other than the fact that I'm a power user, gamer, and PC enthusiast, I pick these options for an important reason: future compatibility. The more modern the standards of the technologies you chose in your hardware, the longer they will remain acceptable as modern PC gear. For example, if today I buy a P4 processor, I'm already buying archaic junk. Sure it works, but it will be left in the dust by the advanced applications and OSs due in the world of technology for the next few years. If I buy a Core Duo, that's better. If I buy a Core 2 Duo, now we're talking tech with staying power. By the way, I only mention Intel processors for a sense of continuity in my comparisons, not to belittle AMD at all.
So look at your current machine. How well does it represent hardware that is capable (and worthy) of running Vista? What upgrades can be made to make it compatible (and worthy)? Are these upgrades possible? For example, if your motherboard only has an AGP slot and you recognize that PCI-Express is the dominant standard today, you must accept that your computer as a whole is plenty outdated and not a good candidate for Vista (though it will work fine as an XP machine for years still).
If you realize your machine isn't up to snuff, you may decide to put yourself in one of the groups I mentioned at the beginning of this article: looking to buy or build a new PC. On the other hand, if your PC's hardware is quite recent and plenty capable of running Vista (and you really don't want to wait for Vista to mature), then go ahead and consider upgrading. Again, I'd recommend a full version install over an upgrade install, but it's up to you. If you think the risk of a few extra headaches to save the money is worth it, then go for it. But as for me, I'll stick to full versions.
My personal plans are to build a new desktop one or two years down the road and if I get any laptops I will probably buy ones running XP (unless by the time I get around to buying a laptop there are hardly any XP machines available anymore). Your plans may differ (and that's fine)... I just hope you found the info in this article helpful to your decision making process.