ArtofAngels -
How long have you been playing video games for? Do you remember when 10 years ago, 3d pathfinding for enemies was so stupid, they would merely "lock on" to your character, and attempt to attack. In games such as Tomb Raider, if you were on a higher elevation than melee enemies, they were automatically dead, since they couldn't pathfind to your location.
Now, that's never, ever the case. AI is much better - not only do they have excellent pathfinding, but can stalk, flank, and outmaneuver your characters - all thanks to the faster CPUs allowing for more AI abilities.
Go look at Radiant AI from Oblivion - NPCs have their own work schedules, and can preform various economic functions, work at jobs, have fairly decent pathfinding abilities, and a host of other things. Did last-gen games have that level of AI complexity? No. Heck, half of the reason Oblivion was delayed from November 2005 to March 2006 was because the AI was "too complex" and would steal from the player character, hide it away, and grow too wealthy, taking over entire towns because the AI was "too smart".
That's why AI is very important - the better the AI, the more NPCs, enemies, squadmates, and various characters will have in games, and the more onscreen can complete important, complex tasks, making games "more real".
Because maybe you like it, but I prefer offline games with squadmates that don't act stupid - its real easy to play many FPS/TPS games in co-op with a real live player because they rarely make stupid mistakes that AI squadmates do. With better AI, this dissapears.
As for Peter's comment - I have very little faith in him. Fable 1 was supposed to have all kinds of revolutionary content, but it didn't.
Back from the dead, I'm afraid.
. The PS3 SPUs have lots of room for all AI functions you can imagine but developers may need to adapt some algorithms.
