I would say that Sony (and their various 2nd party developers) have made the greatest leap this generation.

The loss of a lot of third party exclusive franchises (particularly Playstation staples like GTA and Final Fantasy) really forced Sony to step up their game, and we've seen some great new IPs this gen like Uncharted, Infamous, and LittleBigPlanet. The level of quality Sony published titles this generation is simply astounding.

Yeah, Nintendo really had something when they came out with the Wii, although they slacked terribly with third party support and a little bit of first party support later on in the gen.

Warner Bros, from practically nothing to Mortal Kombat and Batman

I was ready to go right out and say Ubisoft (Assassin's Creed is a huge step forward from Prince of Persia), but after reading some other peoples points and reflecting...

I say Nintendo First, then Bioware.

Last Gen Nintendo was down and nearly out for console games, a many of their best franchises were meh on the Gamecube. This gen Nintendo returned to their roots and gave us, 2 proper Super Mario 3D games, 2 proper Zelda titles, a proper Metroid title, a proper.....proper Mario Kart (one of the best ever), a damn good Smash Bros game, 2 fun Kirby titles, an amazing Donkey Kong Country game, a great Fire Emblem, Wii Sports. and just overall almost of of their franchises saw proper iterations on the Wii.

The only game not to see a return to quality is Mario Party, which is a shame, but oh well.

Still Nintendo did disappoint me on the DS, GBA had a better selection of First Party titles, but Square Enix really did show some support on both the GBA and DS.

As for my #2, Bioware. Honestly after play Chrono Trigger, I never thought they would ever make another single player game better then it. Gamers now care less about plot and more about action (mindless), and well I was wrong. Mass Effect and Mass Effect 2 blew me away. Dragon Age also is very fun.. However I can;t say Bioware showed a massive improvement over last gen. Jade Empire is better then Dragon Age, and didn't Bioware make KOTOR? People loved that didn't they?

media molecule. all the publishers are dicks and have no clue what this industry needs. Innovation my ass. where the fuck is it? its been 5/6 fucking yr.'s and i get LBP2. where fuck is the rest of the innovation promised at the beginning of this gen? lying bitches.

again publishers are dicks.

irrational games -for making bioshock, the best new IP this generation imo, and probably the best story in a game ever . Hopefully bioshock infinite will match the originals excellence. Never played system shock sadly but bioshock was a lot better then the SWAT games irrational previously made.

Bethesda Softworks- A lot of people swear by morrowind, but the game was a huge mess and I think skyrim and even oblivion were vast improvements despite being dumbed down. Besides thanks to mods, oblivions biggest problem of everything scaling was corrected! They also brought back fallout! and in stunning fashion.

Valve- They really stepped up their game this generation and brought about two amazing new ips portal and left 4 dead. They also made one of the best online games ever in team fortress 2. Last gen they only gave us half life 2 and a bunch of counter strike ports...

I disagree with that. Prince of Persia: Sands of Time was one of my favorite games on the original Xbox, though Assassin's Creed is really good as well.

I'd probably go with Bethesda though. I went from not owning any of their games last gen, to them being one of my favorite developers/publishers this gen.

I think Valve has done a wonderful job this gen with games like The Orange Box, Left 4 dead 1&2, and Portal 2. They have SC:GO out next year.

Bioware has done an awesome job as well with ME1&2, and Dragon Age1&2. They have a new game announcement at VGA this year, Star Wars the Old Republic, and ME3 next year. They've been pretty busy this gen.

I also have to give Turn 10 props with the Forza series this gen. They really stepped up from last.  

While I know it's hard to pinpoint all the stuff that can go wrong in an open world game, Bethesda really does need some better testing. The amount of glitches, freezes and other problems Fallout 3, New Vegas and now Skyrim has is absolutely insane.

Of course everyone knows Nintendo stepped up and they did, they brought even more great games then they did during the GameCube era and successfully changed the industry for good.

But as far as third party publisher I would say the publisher that stepped up the most this generation would have to be EAGames. Prior to this generation EA was known for lisenced titles and those titles were mediocre they were nothing amazing. But this generation EA stepped up their game in a big way with aquisitions and founding new studios. Bringing new series like Mass Effect, Dragon Age, Dead Space ,Crysis ,Army of Two, Battlefield (To consoles) as well as bringing back reboots of games like SSX, Medal of Honour and soon Syndicate. Then lets not forget the many other new franchises EA is fostering like Mirrors Edge, Dante's Inferno and lets not forget Command and Conquers reboot expected soon. Then with StarWars:TheOldRepublic EA is proving they can make a very high quality lisensed title to compliment their growing line up of internal IP!

EAGames started this generation off a little slow doing their usual thing relying on lisensed material. But within the generation they turned their whole strategy on its head and created through themselves and other studio partners franchises that would help shape a generation. Activision's few successful titles pale in comparison to what EA has done this generation. EA are my hero's this generation.

As for an individual developer their are too many developers that have brought amazing things to the table this generation. Its really hard to pick any single studio out. I would say Infinity Ward, Crytek ,DICE,  BioWare Alberta, UbiSoft Montreal, EA Vancouver, Rockstar North, Nintendo EAD Tokyo. Too many studios that deserve mention that stepped up their game this generation and helped shape it!