Default terminal for the X Window System.
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Xterm is a very lightweight terminal. It requires few resources, allowing it to run well even on lower-end machines.
Pro Used in every Linux distribution
If you master xterm, you won't have to learn another tty, since it is in every Linux distribution.
Pro Stable, well-tested
Pro Many modern terminals emulate xterm
Many terminal applications, such as OS X's Terminal.app and iTerm2 (among others), all claim xterm or xterm- variants as their $TERM and aim for support of xterm's escape sequences. Many command-line applications will assume or even hard-code escape-sequences and behavior for xterm and those terminals emulating it.
Pro Standard with X Window system
Xterm is installed as standard software with the X Window system, and is there even when installing other terminal emulators.
Pro Shows full characters for wide fallback fonts
Many terminal emulators that deal with wider fallback fonts (i.e. double-wide characters in CJK fonts) truncate display of wide characters, show Unicode "missing glyph" characters, or simply fail to display the characters at all. XTerm is "smart" enough to simply take up the extra space needed to show such wide characters.
Con Historical source code
The stories behind terminal emulation beyond their classical representatives (of which xterm is simply the most long-lived) are somewhere inbetween subtly irritating to downright surreal.
Con No native transparency
Xterm does not natively support transparency (though it can be emulated if needs be).