Contra Simon Jackman, the single transferable vote is a form of proportional representation, albeit one with a very high effective electoral threshold (the share of the vote a party needs to gain representation)—in the worst case, something on the order of (but not quite) 100 percent divided by the average district magnitude + 1 (number of seats per STV constituency).
Of course, the motivation for this discussion is the British election and the Liberal Democrats’ demand for a more proportional electoral system, specifically STV. Labour seem rather more enthused about electoral reform than the Tories at present, but one suspects Labour’s newfound sponsorship of the idea had more to do with pre-election positioning than a genuine interest in reform—Labour certainly didn’t complain with the 2005 election awarded them a healthy Commons majority on essentially the same share of the vote the Tories got this week.
Labour’s pre-election offer was the alternative vote, better known in the United States as instant runoff voting, or IRV. IRV effectively is a simplified form of STV in single-member districts, e.g. STV with a district magnitude of 1. I doubt the LibDems would be willing to settle for IRV, as it probably wouldn’t net them many additional seats, even if their supporters would have fewer wasted votes under IRV (as their second preferences would be allocated rather than discarded). IRV and other similar SMD systems (like the French two-round arrangement) are generally regarded as majoritarian rather than proportional.
In the British context at least, STV makes a lot of sense as a preferred electoral reform. Any proportional system will somewhat disadvantage the two leading parties (the Conservatives and Labour) compared to plurality (first-past-the-post/winner takes all) voting, but STV is less proportional at sane district magnitudes (3–6 seats per district) than virtually all PR systems, so the damage to leading parties is smaller. The major beneficiaries are the regional parties, regionally-weak parties (such as the Scottish Tories), and of course the Liberal Democrats; it should also have the salutary effect of somewhat depoliticizing the constituency boundary-drawing process in Northern Ireland in particular.
Fringe parties and those whose platforms can easily be co-opted by larger parties don’t come out ahead under STV, but that would seem to be a feature, rather than a bug—Parliament doesn’t need the BNP around, UKIP is a party without a purpose in a world with the Tories still in it, and the Greens are effectively Liberal Democrats who just don’t want to call themselves LibDems. Denying these groups 25 or so seats in the Commons between them doesn’t seem like any great loss for British democracy.