Canon S3IS vs. Nikon D5000

I have a minor problem..I want to get into photography and considered buying a new Nikon D5000 with the 55-200mm lens..but my friend offered me his Canon S3IS for free..and I would simply purchase the telephoto lens. What am I trading off in the long run here if I go with the S3? I am very unfamiliar with photography terminology, so go easy. Thanks

Welcome to the forums! A good place to learn.

The Canon s3is is a completely different animal than the D5000. The S3 was a good point and shoot 4 years ago when it was introduced. I don't know how it would rank with the newer ones that are out now. I don't know what your friend means by you buying the telephoto lens. Is that from him? The S3 does not have interchangeable lenses. You might be able to get a telephoto adapter for it but these are seldom satisfactory.
The D5000 is a dslr. The lenses come separate from the body and there are a plethora of them to meet individual photographers needs. from very wide angle to super telephotos and zooms. The lens used is the most important factor in the quality of the pictures.
If, as you say, you want to "get into photography", I think it would be wiser to go with the D5000. It will give you many more options and allow you to advance with your skills to the point you'll want a new body but can keep your lenses for any Nikon body you end up with.
Manufacturers have also improved their sensors so that higher iso ranges can be used now without a lot of noise. The D5000 is one of the better ones, sharing its sensor with the D90.
There just is no comparison between the two except that they both take pictures.
If you want to start off with the free S3 and develop some of your compositional skill and learn the lingo, that is fine, but you'll end up getting a dslr, whether the D5000, or another, eventually if you stay with photography seriously.

I second what Frog said...its like comparing apples and cars.
If you dont have experience with photography I suggest to try a point and shoot to lean the basics and to see if you really like photography itself....imagine this, you buy the SLR and after few months you find out that photography its not your thing...part of the money spent goes down the drain.

If you have some background and you know you like photography...go for it...get the SLR.