From Joystiq.com:

We asked Joystiq readers to weigh in on what they believed Nintendo’s biggest blunder of the last 20 years to be. Here are the results, out of 5,814 votes cast:

1,703 votes (29%): sticking to the cartridge-based format for too long
1,507 votes (26%): focusing on the younger gamer demographic
947 votes (16%): gimmicky products (ROB, Virtua Boy, etc)
932 votes (16%): draconian 3rd-party development contracts
584 votes (10%): Late rollout of the N64 and GameCube (vs PlayStation and PS2)
141 votes (2%): Other (write in)
Of the “other” votes, the top write-in had to do with the botched Sony relationship that ultimately lead to the creation of the PlayStation console and to Nintendo’s fall from the top spot.

Do any of these mistakes have bearing on the console war now underway? Some say that Microsoft and Nintendo are repeating the “cartridge” format mistake by not including support for Blu-Ray or HD-DVD disks with their new systems, but the difference between cartridges and DVDs was and is far greater (both in terms of storage capacity, cost, and techology) than the difference between regular DVDs and DVDs with higher storage capacity.