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PC gaming is hardly the cheapest form of gaming. A low-end gaming PC (which will play console ports on max settings) will run you $500, and you'll have to pay $100 for a graphics card upgrade every year and a half or so. Still, it's hardly dead.

As he said, PC gaming is just becoming the high end gamer location. It's becoming the core of core gaming. Is it making the market more niche? Yes, but it's not killing the market entirely. Especially not with big PC exclusives like Starcraft 2 still coming and certainly not as long as Microsoft continues to supply the PC with every one of their console exclusives.  

@Bottledspringwater, A lot of PC gamers (myself included) have LAN parties. Trust me, it's a blast.