Not as good as Gran Turismo, but FM's online play sets it apart.
Forza Motorsport is the Xbox's attempt at simulation racing, but more specifically it's Microsoft's attempt at a "Gran Turismo Killer". While the game is undoubtedly fun, the core gameplay is nowhere near as refined as Gran Turismo 4. The graphics aren't as good as GT4, the sound isn't as good as GT4, and the car selection isn't as widely varied as GT4. However, Forza Motorsport has one feature that should polarize the population of racing game fans; online play.
If you're looking for an excellent online racing game that requires driving skill, luck, and a lot of trash talking, then Forza is definitely the game for you. It doesn't have quite the pick-up and play appeal of a Burnout or a Project Gotham Racing, but the learning curve isn't so steep as GT4. Pretty quickly, you'll start to appreciate the importance of taking the racing line correctly, applying the brakes and throttle to blaze out of a turn at the right time. Forza also gives a good sense of speed when you're in a Porsche Carerra GT (sooo pretty). Against other humans, you'll experience a big change in how you race. The computer AI, while pretty good, is relatively predictable. It'll generally stay on the line, brake when it should, and take turns slower than you will. But people are another beast. They'll spear you to take the inside of a turn, bump your fender, and generally try to rattle you while battling for 1st on a straightaway. The online setup is about what you'd expect; it's easy to get into a game and start racing.
If you're more interested in collecting a huge garage full of nicely modeled cars, and are looking for beautiful graphics, punishing physics, and the steep learning curve indicative of a simulation racer, than GT4 has this game beat hands-down. Some people complain that GT4 doesn't impart a sense of speed well, but I'd argue that Forza doesn't impart a sense of weight properly. Cars are way too forgiving in the turns (on the default settings), and turns that I'd be punished for in GT4 are doable in Forza. Go to EB and play a race on the Nurburgring on GT4, and then try the same car and the same track on Forza. You'll see that your car in Forza can whip right around the turns without too much difficulty. In GT4, your car feels like the lumbering beast of steel that it is. It's like MS tried to make this game a little too accessible and toned down the difficulty in racing.
While I rate this game as being "good", it's because it's fun to play. But that's not why I bought it. I bought it so that I could play the equivalent of GT4 online. Despite what the ads tell you, Forza is good, but it's just not as good as Gran Turismo.