It's not actually HD-DVD that it will support, it's BluRay, which is Sony's proprietary HD format (their previous propietary formats have included such standouts as betamax, minidisc and umd). The main thing it does for video games is not HD playback, (that can be done on DVD-9 for games, which is what xbox 360 does for 720p and 1080i) it's storage capacity. A dual layered Bluray disc can store up to 50 gb, whereas DVD's are about 9 gb. So in theory games will become so large that only PS3 will be able to support them. In reality Microsoft will make sure that compression technology will be good enough to cram everything into a DVD.
HD-DVD is a whole different format, and there will be an add on to the 360 available to play movies in that format, but it will not support games.
I bought a 360 after Sony introduced PS3 and announced the pricepoint at E3. 360 has more exclusives that I want to play (Assassin's Creed is the only PS3 exclusive that I really want, and it will probably come to 360 eventually), and I didn't see any reason to spend $200 more for a movie player that I don't want and a game console that will only look slightly better.