I was surprised that he didn't sign with San Fran given the fact that they arguably had the best defense in the NFL last year and were on the very cusp of going to the Super Bowl were it not for my Giants ;) However, two factors came into play there 1) the Niners' offense is pretty set in stone, so Peyton would not be able to run it the way he wants, and 2) he prefers playing in the AFC. Both the Niners and the Broncos play in a very winnable division so that really wasn't a factor (I don't think) in his decision making.
His signing with the Denver Broncos instantly makes them a threat to win the Super Bowl for the next 3 to 4 years. I got my fingers crossed for a Manning vs. Manning Super Bowl. Ratings wise, I'm sure the NFL is hoping for the same.