Gone are the days of souped up command-line prompts that look like they're about to lift off into orbit. For a trip down memory lane, check this out. I stumbled across it while Google'ing this problem. Good fun. :-)
No, my prompt is very Spartan:
shaque@mariusis user@host (so you know what computer you're on),
~/git_tree/usersis the present working directory, and
ihaque/vim-tweaksis my git branch.
All of this is awesome. The colors are awesome too (Solarized), they're specially picked colors for a low contrast delta between the foreground and the background, while maintaining excellent readability over prolonged periods. Prevents tired eyes. Go to Ethan Schoonover's website I've linked to, and integrate it into your environment. Srsly.
The problem: once you have colors, and if you use bash's builtin reverse-i-search for previously typed commands, things get fudged. Terminal.app doesn't write the characters properly on-screen so if you reverse-i-search for a previous command, then scroll backward or forward to edit it, it doesn't display correctly.
I spent a lot of hours tinkering with my bash prompt to make this work. It was awful, because bash syntax is very un-pretty. Look at the code for my prompt:
export PS1="\[\e[0;36m\]\u@\h\[\e[m\] \[\e[0;34m\]\w\[\e[m\] \[\e[0;33m\]\$(parse_git_branch)\[\e[m\]\$ "
The fix: use iTerm.app. Terminal.app doesn't render color properly, apparently. I don't have an explanation for this yet, but iTerm.app will gladly handle your colorized prompt and finicky interactive shell features with barely a sweat.
It's also an actively maintained open source project with a shorter release cycle (read: one that is not pinned to that of OS X's).
Bless the folks at Apple, I think they did a pretty good job with Terminal.app. It's miles and miles better than any stock CLI shell Microsoft ever shipped with their operating systems, and the anti-aliasing and opacity control is better than anything I've seen on Linux (though Terminal.app is not nearly as feature rich, or as responsive as anything on Linux).
Credit goes to Terminal.app, I stuck with it for a long time, but I'm switching to iTerm.app now. It's just better.