In my opinion, Forza is better than GT. Here are my reasons-
1. Forza has way more customizable options. It has a near limitless capability of doing whatever you want with your car. Whether it be a paint job, or performance tuning, everything is there for you.
GT, on the other hand, has a very limited capability of car customization- whether it being visual or performance.
2. Forza's damage aspect, and GT's lack of damage.
3. Forza's ability to tune your car using real time telemetry.
4. The cars in Forza sound spot on. Each car was put on a dynamometer to perfectly replicate the sound of each car. GT has a more general sound and is pretty repetitive.
5. Forza has a better online mode. You can customize your lobby to pretty much however you want. Some examples are restricting assists, putting restrictions on upgrades and other specs just to name a few. In GT, the game lobby customization is very limiting and plain.
6. Forza is more towards to sim side of racing. Having played both games, my opinion is that Forza is aimed more towards the sim racing crowd.
There are some advantages that GT has over FM:
1. The graphics of GT are ridiculously good looking and blow FM2 away in that department.
2. The in car view of GT is awesome, and I wish that FM2 had it
3. This one is a killer for me. The Logitech G25
4. The F2007, of course.
Keep in mind that I have barely played GT5: Prologue, but I'm on FM2 just about every day. I'm not biased, because I love any good racing game. The more realistic PHYSICS WISE, the better I like it.
That's why I think that Forza is better than Gran Turismo.