I moved here from the Bay Area (with a 2-year stay in San Diego in the middle) and I'm really happy with the quality of life and the tech community here in Austin. I can buy a house and live comfortably here, and the taxes are far cheaper--important when you really start earning money!
The one you started. Nothing else matters.
Austin feels like a "mini-Bay Area" to me. I didn't want to start my next company in the bubble, especially since we're working with a lot of "oldschool" businesses. Austin is booming, but things are still relatively inexpensive here, and there are plenty of customers. Plus, we found an amazing Python developer here--I'm not sure that would have been as possible in the Bay Area.
I'm still willing to travel to the Bay Area; I just don't want to live there again.
On the other hand, my attempt at a point was that once you've started your business, you have to focus on it. Suddenly all that other innovation around you stops being opportunities and starts being distractions. If anyone says to you, "What you're doing is stupid, you should be doing what those guys over there are doing," you probably shouldn't listen to them. The last thing you need to be doing is chasing instead of being chased.
"The bubble" is a really good way to describe it.
Previously, I thought Gowalla was the only somewhat known startup in Austin, but they sold to Facebook. Are there any other somewhat known startups in Austin?