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http://www.gamesindustry.biz/articles/digitalfoundry-in-theory-mapping-the-next-gen-xbox?page=1

That is a pretty good article looking into the possible performance range of the next Xbox. Those expecting minimal graphical boosts may end up being disappointed considering this seems like an expected minimum or more conservative prediction. Ofcourse they could follow the Wii's examply and go for a small power upgrade and focus on interaction instead, however personally I am thinking that Lionheads "Mega Mesh" technology will be in practical use at the very least.

I expect:

- We will be seeing much more in the way of characer/environment model details (Parallax Mapping/Tesselation enhancements etc...)

- Volumetric items (Smoke/Water etc...)

- Greatly increased texture resolution/detail

- Big improvements in real-time lighting techniques

(taken from my post in this thread http://gamrconnect.vgchartz.com/thread.php?id=127318&page=1 )

This is very fanciful but I would hope to see the first instances of Ray-Tracing used particularly on smaller games/game areas e.g. Twin-Stick shooters, XBLA/PSN games etc...