I heard the opinion that most of work units that we used to call teams are actually groups. One of important team's features is having universal performers, so as if one person is out the work can still be done by another. This is not a case for the groups, when people tend to specialize in some area. Replacing such key people with other is always a problem because the knowledge and skills they accumulated are unique and it takes time to train someone else.
Another difference between teams and group is structure. Teams do not have defined leaders; there are no superior and inferior members.
Modern software developer processes tend to favor teams over groups. Agile encourages cross-training, sharing goals and discourages traditional management practices because they divide people into “us” and “them”.
So, what is better? I can't say for sure because the answer will depend on what you are trying to achieve, who work for you and the way people are motivated. If you can share the success of a project evenly then it would be great to have a team. If there are different levels of responsibility defined and if shares will depend on those levels then you need to stick to group organization.
I am sure that if done rightly teams and groups can be similarly successful.