Taken from Toms Hardware...thought this might be of interest especially to some of the new Xbox folks deciding between which console to get.
If you talk to any half-witted video enthusiast or ask an associate at your local big box retailer - bearing in mind that the two groups are pretty much the same - they'll unmistakably tell you that HDMI is better than component, case closed, end of story. This is just based on tired assumptions of the entire audio/visual industry. HDMI is based on a digital technology while component is analog, HDMI is a more recent development and HDMI costs more. Conventional wisdom says that newer formats are better, digital is always the best and a higher price tag equals higher quality.
Living under the guise of these kinds of stereotypes will eventually tear your brain to shreds. They're just not true. Component video cables can deliver really high quality pictures, just like HDMI. They also tend to be a bit more robust, especially if you need a really long cable.
Another issue is that digital is rarely all that it's cracked up to be. On one side, digital technologies have vastly improved mechanisms to weed out imperfections caused by their analog counterparts. Unfortunately, on the flip side, it's also an excuse to employ cuts to make the new technology as cheap as possible. Specifically, when the HDMI standard was developed, a very robust system of checks and balances was tossed out, in favor of a cheap alternative that can lead to degradation of the cable signal over time. The analog component cable has no such built-in flaw, and in most cases should be able to last a lifetime without problems.
While both cable formats present a picture as essentially a mosaic of red, green and blue color components, the way they do this is based on two completely different processes. For component, three individual inputs are needed; the signal is usually referred to as YPbPr. The "Y" component focuses on the brightness of the image as the "green" channel, the "Pb" component is the blue channel, and the "Pr
" component presents the red part of the picture. All three signals are then put together to create the final picture.
HDMI, on the other hand, uses a standard called Transmission Minimized Differential Signaling (TMDS). What this basically does is incorporate three different channels for each color set, allowing one cable to sync all the channels together in a straight-to-digital format. Component cables typically take a digital signal, convert it to analog for internal conversion processes, and then convert it back to digital for output to the TV.
The resting assumption is that, because of the digital-to-analog-to-digital mechanism involved with component cables, there's always a bigger loss of picture quality. That sentiment is ridden with naivety, though, because HDMI suffers similar issues. Even though it's a digital format, it's hardly a universal conversion from every single output source. HDMI cables also need to convert signals to their own format. The only difference is that it's just messing around with conversions between different digital signals instead of digital and analog.
In other words, the stuff that's going on inside these crazy cables is whacked, no matter what kind of cable you're using. While it's an easy cop out to just assume a more antiquated analog format will have more trouble reproducing a purely HD image, that statement lacks thorough consideration.
HDMI has also been panned because it's much easier for the signal to degrade over time. Long-range HDMI cables are also known to lose quality because of a less-than-perfect set of standards for the format. Analog cables, on the other hand, can last decades and stretch for dozens of feet without any sort of automatic degradation.
Because of its universality with one single input for audio and sound, HDMI has become the much preferred standard for HDTV hook-ups. That doesn't mean it necessarily has a huge leaps-and-bounds advantage over component, though. Component video provides a more reliable picture, carries a more robust set of standards and generally works better for long-range professional-type set-ups.
It should be noted that the other major high definition video standard, DVI, runs with the exact same technology as HDMI, except it does not carry audio. Your HDTV may have DVI inputs instead of HDMI, and everything written here about HDMI video is the same for your video signal.
The real point is that there's not really a winner: the argument to be made is that both formats function just fine. HDMI is nice because it incorporates both audio and video, and that's a very nice extra feature. However, if your cable company's HD converter box only supports component output, that's not a reason to jump to another service provider. Analog technologies date back decades upon decades and are built on a long-standing tradition. And while digital formats are supposed to deliver more fulfilling standards, they're often under-utilized in favor of making cheaper products.