In terms of the number of games sold I wouldn't be that surprised to see digital distribution pass physical sales by the end of this generation ... For the cost of 1 disc based game an individual can buy 4 to 10 downloaded games from the Virtual Console, Wii Ware, XBox Live Arcade, or PSN.
I don't really see digital distribution becomming a popular way to distribute most games that would currently be released on disc for (about) a decade ...
The file size of games on disc is (probably) going to plateau at (about) 10 to 50 GB on average ... In 10 years a 4 to 8 terabyte hard-drive will not be that amazing and (most) people will have access to 100 Mb/s internet acces in most areas; downloading a game over a couple of hours (in particular if it is done in the background) isn't that bad and if you don't have to regularly delete games it shouldn't be an issue.
