Unsurprisingly, we have some great content on this on our blog. My favorite example (shared here) is Adidas video which shoes that yes, a runner can sprint through the desert in Nike shoes -- but a camera man with 50 additional pounds of equipment and wearing Adidas can keep up with him. It strikes the balance between saying, we respect your product and - ours is as good or better. Really clear value, clever approach, not so dimishing as to take away from the credibility or respect associated with Adidas' brand.
Companies can absolutely straddle the line. It's about solving a new problem, solving a problem differently, and disrupting the status quo. The way to do this is focus on the benefit / new value you are delivering rather than simply tearing down a competitor. We offer extended value (strong) vs. they're not as good as you think they are (weak). There's a new way to think about this (stronger) vs. they're thinking about it wrong (weaker). The Bounty ad in the above blog also does a great job of this - no specific paper towel brand is the problem, any brand that isn't using Bounty technology is. Compelling stuff!