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Most of the improvements, of course, come from demand and time. When the PS3 first came out, you could release anything on it and people who never had a 360 would assume it was awesome. Now that everyone has seen that and been there, the bar is higher. And devs have more time to develop now because they're not rushing to get to market right with the system.

You can see a very similar improvement for the 360 so far.

However, I'd say the Wii has come the furthest graphically. There are still tons of bad examples on the system, but if you compare a lot of even the better launch games to the better games now, the better games now are insanely better.