@puffy
The competition is there regardless of system power. The larger companies will alway try to standout by leveraging their engineering and art advantage. What was considered difficult to do with older systems are now a piece of cake on this generation. Take for example Banjo on the N64. It was considered state of the art game for its time. Now brought to Live Arcade, it is still a classic but I don't think Rare even broke a sweat coding it like they did with the N64. Keep in mind also, more powerful systems will also allow for more powerful and easier to use tool, just because the systems can handle it.
The smaller developers will continue to make small budget games that are fun to play. Braid, World of Goo, ... can probably be done on the PS1. Yet here they are thriving on systems a hundred times more powerful just fine.
Graphics will come to a point where it is indistinguisable from real life films. And a lot of real life films now are CGs, so I don't see why someday consoles can achieve this level of detail in real time. But is looking like real life enough? No, the world has to behave just like one, and this bring other elements such as physics, AI into play. Take Fable II for example. This is a game where it is much more than just graphics. Yet, as good as Fable II is, a lot of concession had to be made to make the game with existing technology. I will bet that if you give Peter Molynaux a system 100 times more powerful, he will first tell you he does not know what to do with it. But in a few years time, he will come back and tell you that he need more power for the ideas he has in Fable V.
You're right! A system with this much power now is, priceless! Or more correctly no money can buy such system in the consumer space, as the technology is not there except perhaps in the supercomputer realm.
