When comparing xterm vs Termite, the Slant community recommends Termite for most people. In the question“What are the best Linux terminal emulators?” Termite is ranked 9th while xterm is ranked 16th. The most important reason people chose Termite is:
Termite is a minimalistic terminal emulator. It does not need too many resources to run and it's designed primarily to work with window managers.
Question Ranking
Pros
Pro Lightweight
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 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 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 has ever been there
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.
Pro Minimal terminal emulator
Termite is a minimalistic terminal emulator. It does not need too many resources to run and it's designed primarily to work with window managers.
Pro Vim-like behavior
Termite supports a command mode which is very useful if you prefer to use Vim-like keybindings. It takes inspiration from Vim, one of the most popular text editors, so someone who is used to Vim's commands will find themselves at home.
Pro Simple configuration
Termite is easy to configure. Reconfiguration does not require logging out or rebooting.
Pro Works great with a tiling window manager
Termite is most suited to a tiling window manager with a simple config file.
Pro 24-bit "True Color" support
Termite supports true color palettes, meaning that it allows for up to 16,777,216 possible colors.
Cons
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 Tabs
Con No native transparency
Xterm does not natively support transparency (though it can be emulated if needs be).
Con Cannot set specific parameters through CLI arguments
Setting specific parameters through CLI arguments is not supported in Termite.
Con Problem correctly displaying images while using compton
Images can sometimes not be displayed correctly in software such as ranger while using compton.
Con Difficult to install in some distros
Con Slow text rendering
Con Limited documentation
There's only short manpages and a README on the front page of the repository which has few details on additional configuration and features.