Throughout the history of video games, every new generation of gaming consoles has brought with it new power. The more advanced technology brings many new features along with it, including vaastly improved sound, visuals, physics, gameplay, etc.

When I think of this generation of gaming, I see the visuals we have, I see the physics we have, I see the sound we have, and I see the gameplay we have. What I also see are vastly diminishing returns on those aspects (which is obvious), and it makes me wonder about where our industry will progress in the near future.

Technical Aspects:
Graphics will improve, physics will improve, along with lighting and the rest of those technical aspects. But what about music? Have we already reached a point where sound is "good enough" and can't really be pushed much farther? Battlefield 3 has some of the greatest, most realistic sounds of any video game on the market. How much room is there for improvement that consumers will care about?

Gameplay:
Much like my worry with regards to sound, how will gameplay be evolved and changed beyond what's already been possible? Sure, developers will move out into new areas with more ideas, but what will our new technology be able to let us do that we can't do to a great effect already? What revolutions and advancements in gameplay design can we still receive from our new technology that consumers will really care about? When looking from the NES to the SNES, or the PS1 to the PS2, there were huge advancements in gameplay design due to the increase in technology. What do you all hope to see as far as advancements go in gameplay design for this next generation?

As a side note, I feel like this is why Nintendo has been pushing alternatives to the standard progression with the DS, Wii, and Wii U (yes I left out 3DS). They've been using alternative ways other than pure power to evolve the gameplay aspect of video games, whether gamers consider them genuinely cool or mere "gimmicks." 

I agree a little bit, there are some games I've played that look so realistic, that I don't think I would notice if it were more realistic

Well this console generation basically did nothing better than the last one except for graphics and social expierence so that's what I would expect the next generation to do better as well. Game design has been becoming worse for years now and I don't see it getting better any time soon.

This Generation is actually a step back where it matters.

well all of these things have a limit to how far they can go and along the way different ways will be implemented to make it seem fresh again and make you feel what you felt before in a new way even though its basically the same gameplay mechanic.

VR will be a huge thing for gamers and at first this will be without the ability to feel anything in the game world which in itself will be the next step to VR

VR could easily be added to WiiU later on as it already has the lagless communication abilities it needs and if not on WiiU then WiiUMii

and who knows what the others are cooking up for their next consoles assuming they don't just copy Nintendo to play it safe.

As far as sound goes, there is at least one thing devs can do to dramatically improve the sound quality of their games: live soundtrack recordings. No more of this midi and synthesized shit, at least in the AAA games. Use real musicians playing real instruments.

I know some people feel that in many cases the synth music is adequate, but anyone who has played a game with live music should not doubt the impact it can have.

Just compare this to this. Or this to this.

There are still tons of improvements to do in sound.
Quality of sound effects can be increased as well as sounds getting realistically modified by the environment instead of a few preset filters. We haven't even begun to create sounds from objects colliding, everything is still prerecorded samples.
When a blind person can move around in a game using the move or something similar as a cane for echo location then we have realistic sound.

Procedural music is still in it's infancy. At most we get variations in music pieces to suit the action, usually no more complicated then adding or removing layers. Proteus is making a good step towards procedural music, but we're still a long way of from an AI composer that generates music synchronised to your actions.

So far dance and music games have you play follow the leader. I hope to see more things like Pixeljunk 4am and maybe dance games to generate or modify music based on your movements.

The biggest changes will be in business models. How to get us to pay more cash for less game.

There are plenty areas where gameplay can be improved.

Gameplay wise voice recognition can start to play a bigger role. Adventure games like heavy rain or rpgs like Skyrim where you can actually talk to the npc's instead of selecting from preset responses. Can't find something, simply ask where the blacksmith is from the nearest npc. LA Noire would work a lot better too this way. However I don't expect this until late next gen, probably not until the gen after.

Extra ram and processing power will also allow more complex procedural world generation. Think of a fully 3D version of Spelunky. World and level modification can be used to tailor games to the things you like. The game could mold itself to your needs while observing you playing it. RPGs could use an AI director to keep things interesting. A good GM puts you in peril as much as he can while given you a way out, instead of presenting you with a long grind of easy challenges next to ones you can't possibly beat yet.

Procedural story generation is in it's infancy too. Develop your own story as you go along is the most desired way to play games. A realistic sounding text to speech engine is required for this. Prerecording all possible responses and predetermining all possible outcomes is never going to full fill true sandbox needs.

Mostly I hope next gen will offer more interaction with the environment and npcs besides killing and destroying. I would really like to see more first person adventure games.