If you're willing to shell out a few bucks, I highly recommend mekentosj's Papers over Mendeley. Among the free options, I prefer CiteULike (web-based; http://www.citeulike.org ) or Bibdesk (Mac OS X; http://bibdesk.sourceforge.net ).
I had used Papers for a couple years off and on. I really thought it was worth the money, but after I discovered Mendeley, I found it more useful. The built in synchronization of Mendeley works better than using Papers + Dropbox (which didn't work well). Importing papers seemed easier with Mendeley and a browser. Also, I have a couple of personal Macs and an Ubuntu box at work and it's nice to be able to run Mendeley on both.
I might not be up to date on all the features of Papers but I am pretty sure they never added a better way to sync between computers.
The biggest problem with Papers is citations. Or better, the lack of a decent citation manager. Papers works good for sorting articles. But for most researchers the endproduct is an article with citations. I found it really hard to use Papers in combination with other citation managers.
In the last release Papers did add the possibility for citation export to Word, however managing the styling for different journals was far from ideal. I hope Mendeley will solve this for me.
It's free and cross-platform with collaboration and annotation features ... yep, Papers was a waste of money (Papers did finally fix the bug, so it starts without crashing now that I don't use it).
On the other hand signing up created a public social network profile, subscribed me to a newsletter and updates, and seems to offer no way to delete the account. Great, I just wanted to play with the software.
edit: Missed the "free" part. Papers $40.