Muthu points to a blog entry (by Danah Boyd of Microsoft Research) on research labs vs. academia. It's a good read -- especially for graduate students thinking about career paths. It got me thinking about the topic as well.
I spent two+ years at Digital Systems Research Center out of graduate school, and I loved it. It was great training (Andrei Broder was, as I always rave, a great mentor to me there, but there were many other more senior scientists there who were very helpful to me as well), it really cemented my interest in connecting systems and theory, and my experience matched, to a great extent, the positives mentioned Danah Boyd's blog entry: freedom to pursue what I wanted, a great density of great people, many chances to interact with students, and so on. All without the hassle of grant-writing.
If I hadn't also liked being a professor, I would have gone back. But I liked being a professor, and ended up staying at Harvard. I don't think I'd say one is better or worse than the other. I think it depends on a lot on the person, and for many people, both are possible answers.
The one looming aspect of the research lab (perhaps underestimated in the linked blog post) is the issue of job security. I moved to Harvard just after Digital got bought my Compaq, later bought by HP, later... well, the Systems Research Center just doesn't exist. Similarly, IBM and AT&T labs have gone through massive changes over the years. Microsoft seems like a safe bet in terms of a stable research lab environment for the next decade or so, but it's hard to prophesize beyond that. Now, the "insecurity" of the corporate environment is maybe not such a big deal -- people from SRC for the most part just moved on to different jobs, at Microsoft or Google or Yahoo or HP or a startup or academia or wherever, and continued to be very successful. But I do know from firsthand and secondhand experience it can be an unpleasant, even if only temporary, external disruption if your company situation changes significantly.
I hadn't thought much of the research lab vs. academia issue much in recent years since as a family we're quite happy in our present location, and Boston hasn't really been a hub for research labs until recently. Now, I suppose, there are more options. While I don't imagine leaving academia any time soon, I have been spending some time this summer at the Microsoft New England lab, and have been really enjoying it. But more on that will be a topic for another post.