My family is constantly yelling at me to turn down my speakers when I'm playing loud war games, so I decided I'd make the plunge and invest in a quality pair of headphones. I decided to go with the Razer Megalodon headset.
I have two questions. First, has anyone used this, and if so how was the quality.
Second, is this type of wired headset compatible with a PS3? I am wondering because a PS3 does have USB ports, and I don't know if it supports external devices like that.

don't konw about the quality, but i'm fairly certain that the PS3 will support wired headsets if they're standard USB. For wireless its bluetooth on the PS3

Also, if anyone has other suggestions on good headsets, feel free to tell me, I would be very appreciative.

Sennheiser makes some of the best headphones I've used, I especially like the HD 457 though I doubt you can find it any longer. Not USB but instead standard 1/8" and 1/4" TRS plugs, can't really say much about USB headsets as I haven't used them.

Sennheiser are some of the best you can get. The stuff from Steelseries, Razer, Logitech etc. that's targeted at gamers, is mostly of the ripoff variety in terms of sound quality.

I'm not exactly looking to spend $200 on a headset, just decent quality sound and a good microphone.

You can check Sennheiser Hd 212 Pro or Sennheiser eh250.
http://www.sennheiser.com/sennheiser/home_en.nsf/root/professional_headphones-headsets_headphones_500094
http://www.sennheiser.com/sennheiser/home_en.nsf/root/professional_headphones-headsets_dj-headphones_005180
Average price, but I like them.
Closed type - so they will provide more acoustic isolation for you and from you. )
But you should listen them first, a lot of people find that they have too much bass.

I was thinking of something more like $50 to $70. But as you want a mic as well... I'm pretty much out of options.

I have two pairs of Sennheiser HD 437, and they're the best headphones I've ever had. Never tried any of their headsets though, but I will the next time mine needs changing.
Are you dead set on using USB for the connection? Because as far as I can tell, USB headsets are quite a bit more expensive than standard jack ones.

I'm not, but it would be nice for the PS3 compatibility.
Those look nice Miagh but I also would want a microphone, and those don't appear to have any.

Well, Sennheiser will give you awesome sound reproduction, but maybe something like these are more to your liking: Sandberg Gameset
At $51.99, they're in your price range. They have both 3.5mm jack and USB connections, so you can use whatever you like.

Those are nice.
For reference I am willing to go to $130.

I've got a USB Steelseies 5HV2. Amazing quality.