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TN (twisted nematic) panels are the number one choice for people buying a PC for under $600 and for good reason, they're cheap and offer a lot a lot of screen real estate for the dollar. But they also have their downsides. Some of them have inferior viewing angles and a sub par contrast ratio. Most of us could overlook these shortcomings and use them for general tasks such as browsing the web and gaming.
IPS (In Plane Switching) panels on the other hand offer high quality images, superior viewing angles and a wider color gamut. They feature superior black levels, which are usually a given in consumer level LCD televisions. They also reconstruct colors better since they have an 8 bit panel as compared to TN monitors which usually have a 6 bit panel.
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IPS panels offer superior color production, but have often been plagued by input lag problems. Most IPS panels have a problem with high internal processing lag. It basically refers to the delay between receiving the image from the computer's video card and the image being rendered on the LCD panel. This could affect PC gamers where in some scenarios, the input from the user's keyboard or mouse may not immediately translate to the on screen action. This depends on the game, and would mainly affect games with high frame rates and fast paced action such as first-person shooter games. TN panels do not have this problem as they have a very low input latency.
Most new launches of IPS based panels have resolved this problem to a large extent and hardcore gamers would benefit from the color reproduction of IPS based LCD's.
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The Final Word
Finally, the choice between IPS and TN based panels boils down to your requirements and budget. If you extensively work with Photoshop or other image and video processing tools, the benefits of an IPS panel are immense. The wider color range allows you to view colors accurately and allow multiple people to view your display since it has a wider viewing angle.
Gamer's could choose between a TN panel or an IPS based panel depending on their budget and video card. If your video card supports games at lower resolutions, an IPS panel could be a good choice as it would offer you better on screen imaging at a lower resolution. For those with more powerful video cards, a TN panel would offer you more screen size for the same price and allow you to game at higher resolutions.
For those buying an LCD for the primary purpose of watching movies, an IPS panel would offer you true consumer HDTV level display quality.