Real tree. Artificial trees are okay for smaller ones, but for the big living room, it should be a nice real one. We've actually gone and cut one down a few times.
Pre-lit ones are a bad idea because lights tend to fail; if you use your own strings, you can just replace the string if it fails, but if the pre-lit tree's lights fail, the whole tree is garbage.
They have been planted for this, and they plant a new one each year where we buy them. No reduction in the trees on Earth because of our Christmas tree.
Benedict Arnold 