Personally, I would expect the raw processing power jump to be less than the jump from the PS2 to the PS3; and for diminishing returns to make the perceived jump even smaller. If Sony and Microsoft push for many "technical" enhancements (1080p, 60fps, 3D, etc.) the perceived benefit could be pretty minimal.
Where I expect a big difference is in interactivity ...
From the dawn of 3D videogames developers have been limiting interactivity in the environment to ensure that the resources are directed towards producing the best visual results; static lighting and objects used to limit real-time calculations, non-deformable objects to limit the quantity of polygons, etc. are all tactics used that limit interactivity but improve graphics. The "classic" example I would use of this in this generation was the original FEAR, which was a game that was more static than the original DOOM and Wolfenstein games released a decade earlier.
Why I see growth in interactivity is that the benefit of limiting interactivity will be heavily reduced by diminishing returns which will change how the trade-off is seen.
