I could see it drive more people to the home consoles or the PC/Mac, but I think it's going to change the dynamics of gaming still. You should read this interesting analysis on the subject.
Basically, if people get used to buying decent games $1 a piece, then it's not the big blockbuster that are going to be hurt, it's all the $40 trash that is especially prevalent on the Wii this generation that will be hurting. Smartphones and all the small games on them are doing great, and they're helping raise the bar for what a retail game needs to be to be properly recognized.
I think this is about the right way to look at it, and the reason Nintendo feels threatened is because they will lose a lot of money from all those trash games not selling, because they'll lose licensing income. I can't see many games from Nintendo being directly threatened by these new games (Wii Music maybe), so it's not Nintendo's own products that are on the line here.
But I agree that this could lead people to other platforms. No doubt a lot of people will be satisfied just gaming on their phones, but there will be people who want additional experiences.
