What reduces blur from camera movement more: large aperture or image stabilisation?

In the reviews of lenses with image stabilisation systems there are quite often written the quality of its performance represented by the number of f-stops (2-4 f-stops). As far as I understand, it means, that when shooting with IS enabled, one can lower the shutter speed by defined number of f-stops.

But what gives better effect for sharp images: larger aperture or IS system? For example when taking photo in low light condition at focal length of about 50mm, what will be more helpful, image stabilisation, or moving from f/3.5 to f/2.8? In other words, how many f-stops will add the increasing of aperture from 3.5 to 2.8?

And what is usual highest shutter speed at which image stabilisation starts to improve image sharpness?

Answer

Faster aperture and image stabilization both reduce the effects of camera shake, but in very different ways. A faster aperture lets you use a shorter shutter speed for the same exposure. Image stabilization lets you keep the slower aperture and longer shutter speed and tries to actively counteract the movements of the camera. For completeness, a tripod also lets you use a longer shutter speed by passively counteracting movement.

Because of this, image stabilization is more like a tripod in its effect. Modern systems work reasonably well, and in some situations live up to the claims of 2-4 (or even 5 stops). But I don't think that's exactly what you're asking. The key to your puzzle is in understanding what a stop is, exactly. Reading What does f-stop mean? and What is one "stop"? should help clear this up, but in short, it means doubling or halving the amount of light. For shutter speed, that means doubling or halving the time. In the context of image stabilization, it simply means that you can double your shutter speed by that much under roughly the same conditions and expect the same amount of blur due to camera shake. In fact, What does "N stops" mean when describing an image stabilizer? is 90% of the way to answering your question. For aperture, it means doubling or halving the area of the aperture diaphram, which (for simple mathematical reasons) happens every time you change the aperture stop by a factor of the square root of 2. (That is, the familiar sequence of 1.4, 2, 2.8, 4, 5.6, 8, etc. — it's sqrt(2) each step, rounded for convenience.)

So once you understand all that, the last bit is simple: the difference between f/2.8 and f/3.5 is two-thirds of one stop. Most modern IS systems will provide that amount of benefit easily, even if we assume the 2-4 stop claim to be inflated, and even in non-ideal situations or if you have extra-jittery hands. But, it's not necessarily the same, because you will still need that longer shutter speed, and that might not be the best given subject motion.