MS jumped the gun by launching the 360 early because they had nothing to lose at that point. The original Xbox was never going to catch up to the PS2 and sales were declining rapidly. At this point, the 360 appears to be doing quite well and MS doesn't have any reason to kick it to the curb. As such, I think we'll continue to see updates here and there, but no major overhaul (i.e. Xbox 3/720) until 2011 at the earliest.
If MS does try to trump Sony with an early system launch (still 2011), I'd expect Sony to match MS with a PS4 that is a faster clocked, multi-processor version of the PS3 (i.e. do something similar to what Nintendo did with the transition from GC to Wii). In fact, I expect all of the major consoles to get similar upgrades. The 720 will just be a faster version of the 360 with motion controls, and the Wii 2 will just be a faster Wii with a couple of extra tricks up its sleeves.
Numbers are like people. Torture them enough and you can get them to say anything you want.
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