String formatting: % vs. .format vs. string literal

Question

Python 2.6 introduced the str.format() method with a slightly different syntax from the existing % operator. Which is better and for what situations?

Pyt

Answer 1

Yet another advantage of .format (which I don't see in the answers): it can take object properties.

In [12]: class A(object):
   ....:     def __init__(self, x, y):
   ....:         self.x = x
   ....:         self.y = y
   ....:         

In [13]: a = A(2,3)

In [14]: 'x is {0.x}, y is {0.y}'.format(a)
Out[14]: 'x is 2, y is 3'

Or, as a keyword argument:

In [15]: 'x is {a.x}, y is {a.y}'.format(a=a)
Out[15]: 'x is 2, y is 3'

This is not possible with % as far as I can tell.