For a foreigner, first tier cities are without doubt better cities for living. You've got a lot more choice there when it comes to entertainment, dining, employment, arts and culture etc. It's easier to settle in and feel at home in a first tier city because you can find many of the comforts from home there, not to mention many other foreigners and English-speaking Chinese. Having said that though, second tier cities like Hangzhou and Chengdu are developing fast and also offer many of the same things as first tier cities, minus the high prices.

First tier cities are definitely better. Which one are you in, george? Great picture btw!

Second tier or maybe even third tier. The cost of living is so much less and laowai are more of a welcomed novelty. It gives you more chances for a unique adventure.

This is an interesting topic with no definite answer.  Just watching a TV debating program on IFENG on this topic - Returning to 1st Tier Cities (逃回北上广) where audience and panellists debate the pros and cons of living in 1st tier cities vs those of living in 2nd and 3rd tier cities.  It seems living cost, lifestyle and opportunities are the main factors when people choose where to live. 
http://v.ifeng.com/quanminxiangduilun/beishangguang/

I'm a no tier city. I live near enough Harbin to go on weekends, but far away enough to live in a cheap, small, spacious town. It has 1 KFC so it isn't too rural.

So far I have lived in Guangzhou, Dalian & Wuhan.  For me, Guangzhou is my first choice.  

I love Chinese food, but I can't eat it every day.  So it is great to have tons of different kinds of food to eat here.  Plus it has a Hash House Harriers group for when I am in the mood for drunken revelry.

Dalian is a great second tier city.  It is clean and has a great mix of Chinese, Japanese, Korean & Russian influences.  The only thing that sucks is the freezing winds that howl most of the winter.

Wuhan sucks.  I have nothing good to say about that city.