I really don't understand the people saying "you can't go above 1080p" as if resolution was the only thing that makes graphics better.
They can improve a hell of a lot of stuff apart from resolution... like the pixelated textures, the foliage which most of the times is made of low res 2D crap, realtime global illumination, depth of field, ray tracing, they can use a way higher polygon count, way better animations and AI, realtime dynamic tessellation, way better particle effects, better AA... maybe even SSAA, 16x AF in all games, etc, etc, etc.
Have you people not seen UE3's Samaritan tech demo?
If next gen consoles can do that, they probably can't do it in 1080p (depending on when they release :P I may be wrong though), and it will still be a very big jump in graphics from PS3/Xbox 360, probably bigger than PS2 to PS3.
Even if resolution stays at 1280x720 for most games next gen like this one (highly doubt it), next gen games will look like CGI cutscenes compared to current games.
I don't think Nintendo will always be behind in graphics, look at stuff like the Gamecube, it had better graphics than the PS2... they could do that again someday.









