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The PS3 and 360 have pushed things pretty far in terms of shallow graphical processing (polygons, pixel effects, etc.): but with massively more processing power (which should be available by the next gen) there's a lot new you could do in terms of physics and AI that's not feisible today. E.g. apply real physics to *everything* in the game world (not just a select small number of things), apply much smarter AI techniques (e.g. recursion, etc.)
Oh by gum The ps3 is a brand new console games are not even using 20% of it's potential yet. The Cell is very capable of that stuff now, just needs time. The Cell is an amazing processor.