Sorry about making a double post, the site refuses to let me edit my previous one for some reason. Edit: Oh, it didn't end up being a double post. Jolly good!
It seems likely that the next Sony and Microsoft consoles will have motion controls, I agree. I think you're also right that they'll both go with some relatively cheap machines, in the 300-400 range tops. So the graphical improvement won't be that great.
There are mainly 3 sources of increase in the gamer population. The first is children that become old enough to play games, the second is people who become financially able to buy games (these people weren't previously) and the third is people who suddenly gain an interest in games.
Generally, Nintendo has always been the company that sought the most to make people start gaming, with cheaper consoles, and children-friendly games. With the DS and Wii, they've started the search for non-gamers to start playing the "non-games", as Wii Sports, Nitendogs and such.
Microsoft and Sony have had a different approach. Their goal hasn't been to turn people into gamers, it has been to make the already existing gamers buy their machines, instead of the other companies' consoles. So far, that has mainly been capturing people as they hit their middle/late teens, and making the males 16-30 keep buying their consoles.
It won't be like that next gen, at least not completely. I expect that in the 8th generation, Sony and Microsoft will try to do two things. Primarily, try to get the more "hardcore" gamers to buy their machine instead of the opponents' (like described above), but they're also going to try to make some of the gamers that Nintendo brought in in the 7th gen to buy the Sony/Microsoft machine instead.
In other words; they'll have their hands full just doing what they've always been doing. A very simplistic way of describing this industry is: Nintendo brings people into gaming > Nintendo no longer makes games they care about > Sony/Microsoft/Sega picks up those gamers by making/getting games they prefer.
It's not like that for everyone, of course, but I'd say that's the most common course of movement. It doesn't stay true for a lot of the people who bought a Ps1 and never owned a console before, but it does for most of the rest.
And that's what the 8th generation will look like. Sony/Microsoft will try to make the "old" (ie, people who've been here since 7th gen or before) gamers buy their machine, while Nintendo tries to get some "new" gamers.
So Nintendo will still make their standard Mario, Zelda, Donkey Kong, etc, games, but they'll most likely try to do something innovative again, like the Wiimote was. I imagine they'll largely try to appeal to women more, so I'd expect more of their games to be aimed at the female audience. (Unlike pretty much all of Nintendo's Wii games, which were aimed either at males or equally much at males and females).
Shortly said, Microsoft and Sony will make games to keep the old gamers. That essentially means that they will make games to appeal to all of the 7th gen gamers, including the "casual" ones. Nintendo will try to find a new marked to find, and the best one at the moment seems to be women of all ages, and people above 40 of both genders.
So we're most likely going to see both Microsoft and Sony make/get more "kiddy" looking games (think the Nintendo artstyle), while still making a fair bunch of realistic games. Nintendo is likely to make more graphically unimpressive games, and more "easy to pick up, but not that much depth" games.
8th gen Sony/Microsoft will be like a merge of 7th gen Nintendo and 7th gen Sony/Microsoft. 8th gen Nintendo will be 7th gen Nintendo with more games like "Wii Fit" "Mario Kart Wii" "Brain Training" "Animal Crossing" "Nintendogs", "New Super Mario Bros Wii" and such, and less games like "Super Mario Galaxy" "The Legend of Zelda: Twilight Princess" "Metroid Prime" and those games.
The reason Nintendo made a fair bit of more "hardcore" games lately is mainly that they thought that they had won the war for the "casuals". Only when they've assured the new gamers will they in the 8th gen aim to get more of the 7th gen and before gamers.
