That's because they've blown all their money into run of the mill Kinect games that nobody cares about. MS could have been top dog this gen. The problem is they made way too many mistakes by not investing in 1st party studios, investing their money into gimmick devices (Kinect), blowing their money on exclusive DLC that is only exclusive for a month or less, and so many other things. So far this gen Sony has delivered every year with really good and fun games. 2007 though was a bad year for them, after that it was gravy though. Hopefully next gen Microsoft just goes all out with "games" and only "games". Time to invest into some 1st party studios just like Sony has done for all of these years.
I thought 2007 was great. Motorstorm (in the states), Warhawk, Heavenly Sword, Ratchet and Clank Future: Tools of Destruction and Uncharted: Drake's Fortune. For the PS3's first year out, that's a pretty awesome selection of exclusives.