Intel have shown some ray-tracing demos not long ago, and they seem to be pretty optimistic about ray-tracing as the future, pushing the tech through their future hardware, their first dedicated GPU code-named Larrabee slated for I think 2010, a very CPU-like grafix card.
Here are very new Ruby demos from AMD showing ray tracing (on current HW, one or more 4870's I believe):
This is amazing, but I don't know if it is ray tracing in real time (did anyone catch that from the interview?):
(a new motion capture technique by AMD to render ray traced models)
But then you have this recent interview with John Carmack (the 3D-programming guru of our age for those who didn't know). He seems quite negative in general, and is basically saying that he hasn't seen much concrete proof neither on the HW or SW side about ray tracing being a realistic solution in gaming in the near future (=next gen), although he is himself experimenting with partial use of ray tracing in gaming-like applications.
John Carmack on id Tech 6, Ray Tracing, Consoles, Physics and more (Mar 12, 2008)
http://www.pcper.com/article.php?aid=532&type=expert
