I personally prefer Vinyl but use my iPod far more often.
When it comes to storage capacity, portability and convenience there is just no argument. CDs or mp3s are far better. that being said,
The difference between vinyl and CDs is that a CD is recorded digitally and a vinyl is an analog recording. Digital recordings are a series of snapshots of the actual sounds, therefore, do not capture the complete soundwaves. Analog, however, is what we hear in real life. A vinyl, though not completely perfect, has a copy of the actual sound carved onto it microscopically. But, any dust or minor imperfections are also picked up and amlified resulting in the static that is heard when listening to a imperfect vinyl.
It really boils down to what equipment you have and what level of audiophile you are.
A really good turntable (at least a Linn-Sondek or Thorens) coupled with high end speakers playing a virgin vinyl, half speed master version of a well recorded album will ALWAYS sound better than the CD on the same system. There's no question.
Here's a good illustration I found on the How Stuff Works website.