LR3 was designed from the ground up for photographers, photoshop is not.
Photoshop is expensive, because it is a powerhouse program designed for graphic designers, of which it is also great for photographers. Many people who use photoshop for photography, are using only a fraction of the resource available to them, paying a lot of money for resources they will not use.
LR3 is much more than just a database program. Each time there is a software revision, the capabilities are expanded. There are many photographers today who use LR primarily for their work. ACR is part of the package of LR3, and has a lot of very good functions for photographers.
Derrel mentioned plugins, such as NIK. I use NIK software in tandem with LR3 and could not be happier with the results. These plugins add cost, but are much easier to manipulate than PS. There are free plugins, but I have not tried any...yet. The way I see it, Adobe will continue to increase the capabilities each time they offer upgrades. It only makes sense, as it is a large money maker for them.
If you are not sure what to do, there is a 30 day free trial. That will provide you with enough time to see if the program is suitable for your needs.
**Adobe just posted a 69% increase in revenues...Hmmm, LR3 and their xxx5 offering of their other products.
What LR3 cannot do is move pixels around, such as eliminate wires, branches, etc... PS also can do much more sophisicated work. PS has a function called content aware. That function is almost worth switching over to PS....almost.
The cost of photoshop (when legally purchased) and the learning curve generally are the reasons that people will look elsewhere for a software program.