Skip forward to a couple weeks ago and I heard about VMWare's pre-release special pricing offer for a copy of Fusion. This is the first point to bring up — the price of virtualization software has come way down. I believe that's in part to the competition that now exists in the space between Parallels and VMWare. And that's a very good thing. I don't remember what I paid originally for that first copy of VMWare so long ago, but I believe it was north of $150. I bought my copy of Fusion for $39. Vive le competition.
Both offerings have very similar feature sets. Both install special 'helper' software within your Windows guest operating system to facilitate things like video resizing (if you drag the Windows window larger or switch to full screen mode, both will resize the video area accordingly), mouse pointer sharing, drag and drop file copying, clock synchronization, etc. Both support some type of "undo" functionality that allows you to take a snapshot of the guest as it is now and at some future point revert back to the snapshot if something goes wrong. Both have a mechanism for running Windows programs in their own windows along side your mac apps (hiding the Windows desktop). Fusion calls this Unity, Parallels calls it Coherence. In those areas, it's pretty much a tie.
Both offer software that you can install on Windows either on a physical computer or on some other virtualized environment that will copy out the Windows installation and make a new virtual machine out of it. Here, I give Parallels a slight edge because the VMWare solution is actually hidden on their website and is actually designed for their enterprise products (but happens to work for Fusion). Also, since VMWare guests use ACPI and Parallels guests don't, you wind up with some virtual hardware quirks that require reinstalling Windows to completely clear up (Windows XP doesn't support switching from a standard PC to an ACPI PC without reinstalling. But you don't have to wipe the disk, you can just reinstall Windows itself, painful though that is). Since Windows tends to accumulate a lot of cruft in the registry anyway, a clean reinstall isn't a bad idea in any event. But if you have a lot of software that you don't want to have to put back on, you don't have to.
VMWare guests can run with both cores of your multi-core CPU (if applicable), Parallels guests are uniprocessor only. Unless the Windows software you use is heavily threaded, I'm not sure you'll notice too much difference there. Both systems seem to me to be responsive when dealing with typical interactive software.
Both systems support acceleration of 3D API calls, however my mac of choice is the Intel mac mini. VMWare doesn't support acceleration on the integrated Intel 950 chipset. I don't typically play 3D games, but I did try BZFlag under parallels when the 3D support was announced. I was able to get more or less the same frame rate as when I ran the native OS X BZFlag client. I haven't repeated this test with VMWare, however. If 3D games are your reason for booting Windows, then perhaps Parallels might be a better choice right now.
Both systems allow you to suspend the guest and resume it. In both cases, the normal Windows APM/ACPI suspend/hibernate functionality is avoided. Instead, the guest is simply halted in its tracks and upon resumption, the virtualization tools fix the clock and other sorts of things. VMWare's guest tools allow you to set up scripts that will run at suspend and resume time. But the big difference I've noticed is that when I resume a Parallels guest, the entire machine (both guest and host) seem to be mired in a tar pit for about a minute. From what I can tell, it's probably paging the guest in from a memory mapped file. But there is no indication of what it's doing or how long it will take. By contrast, when suspending or resuming a VMWare guest, there is a progress bar to let you know how much time is left, and when the resume process is done, the machine responds instantly at full speed. VMWare wins this one hands down.
One application I use under Windows is the Netflix WatchNow client. When you watch video in it under Parallels, you can often see tearing effects. Presumably these are caused by a lack of synchronization between the refresh rate of the host's monitor and the guest's virtual frame buffer. Whatever the cause, it can be quite annoying. But VMWare doesn't have that problem. Score another victory for them.
Another differentiation in behavior is when playing You Don't Know Jack: The Ride. Under parallels, this game has choppy, stuttery audio and often pauses for seemingly no reason. Under VMWare, it works perfectly. It's only an anecdote, and it's not a show-stopper for me, but it's nudge in VMWare's direction.
So in the end, I have to give the victory to Fusion. For a 1.0 product, it's more than just a strong contender, it's the clear victor. Can Parallels catch up? Sure, but given how long they've had a mac product, it's surprising that they need to.