Ted suffers from the basic problem that you see in most of MacFarlane's work -- the next big punchline is always more important than the story -- but it's more coherently plotted than, for instance, the average episode of Family Guy, and the jokes are funny enough often enough to make the movie a lot of fun.
Mark Wahlberg stars as John, a guy in his mid-30s who's never quite finished growing up. In part, that's because he still lives with his teddy bear, Ted (voiced by MacFarlane), who came to life one night after 8-year-old John's wish came true. The two of them share an apartment with John's girlfriend Lori (Mila Kunis), whose patience with this unorthodox arrangement is starting to wear thin.
The relationship between John and Ted is the best part of the movie, and the effects work makes Ted a remarkably convincing character. An angry brawl between the two of them is a highlight of the movie. Other characters are less successful. Kunis isn't a natural comedian; Joel McHale's romantic rival is a bit one-note; and Giovanni Ribisi dials the creepy a couple of notches too high for the tone of the movie. The movie also features what is surely the most unlikely celebrity cameo of the year, from someone who's slipped so far into obscurity that he barely even still qualifies as a celebrity.
This is a Seth MacFarlane project, so the jokes are often vulgar, tasteless, and offensive, but I laughed a lot. Not great cinema, but terrific entertainment.