If you're thinking about getting one of these two, then you have undoubtably heard different things about either one.
Skip to the chase: Satellite TV is better
I've been a subscriber to DirecTV for 6 years now, and I think it beats digital cable hands down. I've been lucky enough to not have to had used digital cable at home, but I have seen it at friends' houses and have asked opinions of many people.
Both of them use MPG encoding in order to deliver the picture to your TV and both need at least RG6 cabling to have enough bandwidth to carry all those signals. Satellite TV, however, has much more bandwidth so the picture is usually much less pixelized. Every digital cable pictureI have seen has been more pixelized. I have seen it as well with satellite, but it's much less pronounced and happens less frequently.
Digital cable companies, such as AT&T, have started negative-ad campains against satellite, and much of the information they are spreading just isn't true.
Myth 1: With Satellite TV, you have you purchase expensive equipment in order to use it.
Six years ago when I bought my first receiver, I paid $650 for the receiver and dish. You can now get the same basic package for about $50. Both DirecTV and Dish Network also offer deals where you can get the equipment for free (or practically free) as long as you subscribe for at least a year. So yes, there is some equipment needed, but it's by no means "expensive".
And what about the digital cable receiver? Digital cable companies fail to mention that you need a receiver for their service, too. You can either buy those (not sure of the cost) or rent/lease the equipment (at around $10-20 per month). So in 5 months (or less) you have already covered the cost of the satellite receiver. Hrmm....
Myth 2: With Satellite TV, you have to pay for installation.
Both DirecTV and Dish Network have been offering *FREE* installations for several years now. Guess the cable companies haven't been paying attention.
Myth 3: You can't watch any local stations with Satellite TV.
Starting in around January of 2000 (as far as I remember), satellite providers were allowed to start broadcasting local stations. Cable companies fought this for a LONG time, and in the end lost.
The downside, however, was that the satellite companies were only broadcasting the 4 major networks (CBS, NBC, ABC, FOX) in each area. Starting this past December (2001), DirecTV started offering around 15 local channels in major markets (with more to come) since they had another satellite in orbit now. I can now pick up UPN, PBS, WB, and several other local-only stations. I was subscribing to basic cable to pick these up, but not any more. The satellite version of the local stations looks much better than antenna or basic cable, by the way.
So if you're thinking of getting one of these services, I'd strongly suggest going with satellite TV. You will need to check and see what the availability of local stations in your area is as they can't offer it everywhere. As for which satellite provider, you probably can't go wrong either way. Dish Network seems to have some lower-cost options, but DirecTV overall has more channels. (There is rumor the two companies may be merging, in which case DirecTV would probably be the controlling company)