Is 7 better than XP? Oh boy, let me count the ways....
1. Security: Before I get some of the standard "I don't need Vista/7 to protect me, I know how to secure my machine" responses, let me reiterate. There have been some flaws in Windows that an antivirus and firewall simply won't catch. A good example of this would be the SWF flaw from the early days of Vista. UAC protected against this flaw, and now with 7's revised UAC, there's no reason to jump from XP to 7, if nothing else, for the added security.
2. Performance: On every machine I've tried, ranging from old machines with Athlon 2400+ processors with 768 MB RAM, to Phenom X4's with 4 GB RAM, 7's WORST performance was on par with XP at its best. And given XP's susceptibility to "Windows Rot", I don't feel the need to format every couple of months to maintain the best speed possible. Windows 7 always feels snappy, no matter how much I load the drive up with software and other files.
3. Appearance: I realize to some, this is a non-issue, and that there are literally thousands of themes and visual styles available for XP, but with 7, I don't feel any sort of need or desire to change its appearance. Explorer looks clean IMO, and while it's argued that XP's Explorer was more customizable, 7's UI is so neat that I don't feel it needs customization. Aero looks a lot more refined than it did in Vista, and with WDDM 1.1, it's also more efficient with memory.
4. Taskbar: This might be a sub-category of Appearance, but with all the improvements made to the taskbar, I felt it deserved its own category. The way they essentially combined the old taskbar with Quick Launch makes for a very impressive and more importantly, very efficient experience. Any programs I use frequently, I just pin to the taskbar, so it's always there, and I don't have to clutter my desktop with icons or search through Quick Launch. At first I didn't even like the new taskbar because I was so used to using Quick Launch, but after using it more and more, the more I liked it.
5. Networking: Setting up a home network is still simple, like it was in Vista. I'm sure the vast majority of us know how to set up a network in XP anyways, but with 7, it's much more seamless.
There are some others like Libraries that I haven't touched on, but I haven't fooled around enough with other aspects of the OS to provide an in-depth opinion.