Sensor size vs mega pixels?

Lets say we compare Nikon D90 to Canon 550d. They have similar sensor size (D90 is slightly bigger), but 550D has a much larger MP. I've noticed that when I enlarge D90 photos, things tend to get pixelated (not as sharp) and I remember some review website (could have been dpreview, can't remember now) saying that a bigger MP means I can enlarge the photo without much damage.

Is this true?

Simple answer, yes. More input=more output. But there are other factors too. Sensor size, for one.

The larger the megapixel the larger you can print or crop the image without it becoming defective. HOWEVER the smaller the sensor with the same megapixel the worse the image quality. That's why a dslr with 10mp takes way way way way better photos than a point and shoot with 16mp.

How LARGE are you zooming in? You shouldn't visibly notice pixelation on the D90's images until maybe 400% of the image size. And that is sitting right on top of the monitor, not at a normal viewing distance.
Billboards were printed with 2 and 3MP cameras.
It's all about viewing conditions. If you are printing a billboard you aren't going to stand a foot away from it and look for pixelation. If you print a poster you aren't going to stand a foot away from it and look for a little fuzziness (because that's what the pixelation IF it happens in poster size will look like.) If you print a 30" x 40" sofa print you aren't going to view it from a foot away looking for pixelation…

All of those things you are going to view from a distance to see the whole image. You can blow your images from your D90 up to billboard size IF they are properly focused and well exposed.

With more pixels, you can blow up an image more since you have more little dots making up your image. More pixels doesn't necessarily make your image better since the area of each pixel site goes down with increased number of pixels, assuming the sensor size remains the same. Smaller pixel area means more noise and less dynamic range which can cause issues when shooting in low light. Pixel area is why small point & shoot cameras have horrific image quality when it comes to noise issues.

If you're seeing a pixelated image on the computer when you blow it up, you are viewing at more than 100%. You should be viewing at 100% to do comparisons - no more or less. Guess what, if you view the Canon 550 images at more than 100% you will see pixelation too.

To put this in perspective, the difference between 18Mpixels and 12Mpixels is only a factor of 1.2 in image width (5184 versus 4288 pixels wide). If you print this at 300 dpi, that would be a print 17.3 inches wide for the 18Mp image and 14.3" wide for the 12Mp image. If you're printing below 14" width, then you won't see much difference between the cameras unless the quality of the lenses is different.

Worry more about shooting technique than equipment.

In image quality you have to double the megapixel count to get any meaningful change in quality. So comparing the D90s 12Mp to the 550s 18Mp would be borderline as to whether or not you could even ascertain any difference at all.