Forza 3 has more realistically detailed graphics for the track environments...However, GT5's car models, interior and exterior, simply poop on FM3's...the way the lighting and reflections look on the cars is really spectacular. If you see any of this ANY other way, you're a fanboy of one of these games
I have Forza 3 and agree with FozzyFan. I do think this GT5 demo has improved the anti-aliasing issues a bit from GT5P which is where GT was obviously worse than Forza 3 before. Now anti-aliasing is similar between the two. Other than that, Forza 3 has better background scenery - e.g. comparing Forza 3 Suzuka and GT5P Suzuka although then looking at real life video of Suzuka shows GT5P to be more realistic - I think the Forza 3 guys have added scenery to make it prettier!