I guess I'm thinking more on the PC side of things, I don't really follow smart phones

I think tablets in their current incarnations could be fads. As they expand more into basic office functionality and features become more robust and more apps are created for them, I think they'll carve a permanent niche into the market for people who need mobility but not the power of a laptop. With the sales of the iPad, it's hard to argue the legitimacy of the sector. Everyone I know who has one loves it and its use hasn't diminished at all since they purchased the device several months ago. That doesn't seem faddish to me.

iOS doesn't need to be the sole development for a game for displacement to happen. Look at DS sales; casual gamers are already jumping ship to other, more convergent, devices. Nintendo has even tried to make the DS a more convergent device itself. The hardcore gaming market will always exist on dedicated gaming market but that isn't what has made Nintendo its billions... it's the casuals who pick up a dedicated gaming device. With the power behind Android and iOS, I never see people carrying DSes around and playing them anymore. Everyone is sitting with a phone or a tablet to kill the time.

People keep ignoring mobile gaming devices but the numbers are right there for everyone to see. Companies are making money hand over fist on casual games for the platforms and people are buying them left and right while sales continue to drop for dedicated gaming machines.

Here's an anecdote that suggests iOS might be having an impact on handheld console development. Founder of Wii/DS developer N-space places blame on iOS while explaining staff layoffs:

http://nspaceinc.wordpress.com/2010/10/09/n-space-rumor-control/

The games industry is, frankly, a mess.  The economy has robbed customers of disposable income, reducing the number of titles that purchased per year.  Huge budget titles have to sell massive numbers to return a profit and the App Store has disrupted our industry in the same way iTunes changed consumer expectations for music.  People that use to buy many games every year now buy a few AAA titles, supplementing their need with games that are free or cost less than a pack of gum.  Anything in the “middle” is struggling.  The Wii and DS markets have nearly collapsed and 3DS is a brave new world the publishers are excited about but also very cautious to enter.  Even for an extremely successful Wii/DS developer like n-Space, with a long history of delivering quality titles on time and on budget, this creates a very challenging business environment.

Perhaps he's just using iOS as a scapegoat to explain an industry where survival has always been a struggle.

So they bigger than Microsoft now?

Pretty much this; this part of what I concluded when I wrote a paper about video game convergence  for a media studies class. Rocketpig's description is a lot more succinct though. I see nerdrage shifting from Nintendo to Apple as gamers wake up and realize what's happening.

i'll only speak to the anecdotal evidence that is my own buying habits but..

since i got an iphone i have completely stoped buying games for my DS,  changed my mind about buying a psp, and have very little interest in a 3DS.  yes, the games on iphone aren't of the same caliber as ds/psp games but the convience of the device (size wise and multifunctional wise) just far outweighs anything nintendo/sony offers. throw in the fact most games are 1 or 2 bucks and can be downloaded from anywhere and i can't imagine buying a dedicated handheld gaming device ever again.

and frankly, angry birds is amazing.

rly ?

what are the MS numbers ?

u mean : MS and their Window right ?

Impressive numbers. Iphone 4 is really great glad i bought one but... it isn't great for games.

Come on, it's actually quite fun. I don't own an iPhone, but my brother does and when he lends it to me I always feel like I could spend afternoons playing that puzzle games and stuff.  Match it with a good console or gaming PC and most people will feel like there is no need for "mid-terms" like DS or PSP. I see it happening to people around me. 

I know that everybody out there (on this site at least) is like "wah wah the 3DS will own all with teh 3rd partiez" but I'm more like =/ because I feel it's sales will be hurt big time by the iPhone when a 3D interaction of it comes out. The same goes for the next PSP but it seems like it's going to be more of a multimedia device.