I'm aware of this controversey. The best scholarly experts believe the basic passage is true although it may have been altered or added to somewhat. Further, Josephus mentions John the Baptist as well.
It's widely accepted that the Latin version of Josephus that we have was modified by the Christian monks who copied it from the original, but there is also an Arabic text of Josephus which mentions Jesus. (Not surprisingly, the Arabic version says that Jesus's followers "claimed that he came back from the dead," while the version copied by monks reports the resurrection as a fact. That is clearly an interpolation; Josephus was a Jew, not a Christian, and if he believed that Jesus really rose from the dead he would have devoted more than one paragraph in a 12-volume history to him.) But Josephus is certainly powerful evidence that Jesus was a real person; another passage in Josephus (found in both texts) also reports the execution in 60 C.E. of "James, brother of the so-called Christ."
More on ancient Jewish references to Jesus here.