So I have a 12 and 8 year old. They got a paper route and saved bday money and bought themselves a used WII, for which I paid to get a dance pad and extra controller for them, and got rock band 2 for and XMas present for the Mrs.
The WII offers them great non-bloody violent games to play (they love zelda and mario) however they use the WII for Netflix just as much as game time. The WII offers Netflix with out having to pay for "Xbox gold".
We also have the XBox 360 and Kinect. With the Xbox they love the Lego starwars and the kinect games. However I have to keep them out of the other games that I have had donated to me like Gears, Halo and Dead Space (luckily I can leave them on the shelves and they know not to touch them).
We do limit their screen time, and sometimes we tell them that they have to play an active game (dance dance, kinect adventures, Dance Revolutions, or even fruit ninja). Kids really get into the games and they can work up a sweat. OK I can work up a sweat with them too...
The difficult part is when your kids feel left out and not understanding when their 11 years old buddies are all talking about playing the latest Grand Theft Auto and Call of duty game. My kids know why they are not allowed to play them, and they completely understand it, but it does make them a bit of an outsider and harder to fit in.
The WII I find is more intuitive, especially with Netflix, and has less chance of having inappropriate games. The Xbox's kinect is a blast, but again I have to pay the XBox gold tax to do certain things...