PC gaming isn't dying, but it is definitely becoming more of a smaller niche dedicated gaming platform relative to console gaming.
PC gamers like to point out how a sub $100 VGA card performs better than any console by leaps and bounds (unquestionably), but they're still not cheaper (even with a sub $600 "hobo" box) and definitely not more convenient or easier to use than any console either.
The thing is, to the average gamer, that doesn't even matter. They just want to play the latest games and all the hottest titles are available (often exclusively) on one or more consoles. They want convenience, low hardware price and an all in one box (not a kit) solution. Only the true PC enthusiast will nitpick over the differences in the same games to justify the time and money spent on building a respectable, if not envy inducing gamer rig.
Often, the PC gaming industry is driven by consumers who seem to care more about building and buying hardware than dedicating all their free time to buying and playing games.
And many of the most fervent PC gamers, who do dedicate ridiculous numbers of hours to gaming, often play the same games pretty much for as long as they keep gaming. Counter Strike, Team Fortress 2, Star Craft, WoW, etc. are the types of games many gamers dedicate most if not all of their gaming time into rather than continually buying the latest new releases, which is what obviously drives the business end of the industry. Not buying 4 VGA cards to run in SLI/Crossfire mode, or replacing VGA cards every 6-12 months if you thrive off game benchmark stats.
But PC gaming will never die, even if retail distribution becomes almost entirely DD through Steam and Direct To Drive, etc.
Onlive could potentially make "PC" gaming more mainstream as it theoretically takes all the hardware requirement issues out of the equation. Unfortunately, it takes all the hardware requirement issues out of the equation, meaning PC game consumers no longer have to buy PCs, specifically all those game centric high performance VGA cards that ATI and Nvidia have to sell to PC gamers to keep business healthy enough to continue to heavily invest in continuing R&D.
If nothing else, PCs will likely always have MMORPGs to keep it viable as a gaming platform. And while Flash games will always have players, they really don't count since they don't drive the game industry in any way, regardless of how popular they may be to people who play games yet aren't "gamers" from the standpoint that they spend hundreds of dollars a year on new games. Most of those games are being played on laptops with integrated video totally unsuitable for 3D gaming at playable levels.
And the majority of laptops, which have become (or will shortly) the most popular type of computer for the general consumer, are in this same category. Inexpensive, with integrated video. Far from ideal for playing the latest 3D games if they even meet the minimum requirements at all.
Netbooks, if they continue to thrive as a PC replacement for low power users, will only make this trend worse.