I was extremely excited to see The Dark Knight for one reason: Heath Ledger playing the Joker. I love to watch Jack Nicholson, and appreciated his Joker in Batman, and I loved Heath Ledger in Brokeback Mountain (the film left me in uncontrolled, sobbing, hide-in-the-bathroom tears). So after months of know people were raving about Ledger's performance (while taking deliberate care not to read about why they were raving), I spent much of the movie just waiting for the Joker's scenes (in Slings & Arrows, Geoffrey Tennant tells the young actor playing Hamlet that it's all about the soliloquies: it's what people are there to see, and if he can nail those, the dialogue is easy. And indeed, it was just before a soliloquy that the critic in the audience grins and readies his pen). So if I say the Joker's scenes stole the movie, that may be a slanted perspective (or it may be the white, purple, red, and green contrasted so much with the black and orange that dominated the rest of the film).
I think both Ledger and Nicholson played the part with restraint, but a very different type of restraint. Nicholson's Joker is cool, smooth, his movements controlled. Ledger's Joker is twitchy. A twitchy restrained chaos: head hunched and twisted, hands in motion, halting spasms, a voice almost whiny even as it is both comical and frightening. Both played a character that could make any movements at any moment, that could perform any sort of chaotic, irrational, senseless action--but that for the most part didn't. Ledger's Joker is more unhinged. I don't know which I enjoyed more--Ledger's Joker is a little more fun, but Nicholson's Joker is...well...Nicholson. I don't know--I should probably rewatch Batman before commenting more.
There's just a chance that neither was actually as good as Cesar Romero. The problem for Romero is that he was a Joker stuck in a Gotham just as colorful and silly as him, a foil to a campy Batman. Imagine taking Romero's Joker out of the campy Gotham, and sticking him in Tim Burton's Batman or Christopher Nolan's The Dark Knight. Romero's Joker would have been the real chaotic contrast to Michael Keaton's or Christian Bale's Batman.