Obviously we are nearing the end of the race that is the graphical evolution. Video games are sharper, with better lightning, shadowing, textures, models, etc... PC already proves it already can even challenge real life at some moments with Crysi. On consoles' part, they will have to wait for the next generation.

Within a few years, the visuals of videogames will most likely be more limited by budget rather than techonology. PC and Consoles will have graphics more and more alike, and the technological advantage of PCs won't be used for more than just extra AA/AF,  and such it will be cheaper to buy PCs that will even challenge Consoles price-wise (which is already happening today - a $500 PC runs games better than any console). So who benefits the most? PC or Consoles? (don't answer 'gamers', we all know that) I will give a few reasons for each side, in relation to the next generation of gaming:

PC:

- Technology will be cheaper, and because of that PC will be able to challenge Consoles price-wise almost from their launch. Reasoning? In just 1.5 years after this generation's PS3/Wii launch, for $500 you can get a PC that puts games graphically better than any console (and that's just $100 difference from PS3).

- Low End PC's will be good enough to show PS3/360 graphical quality atleast. Reasoning? Today Crysis on low settings crushes every DC/PS2/GC/Xbox game, and even 98% of Wii games.

- Decrease of Hardware Cost will make and prove once again that PC is the cheapest platform for gaming. Reasoning? PC has the cheapest games, and no near-obligatory subscriptions(cough*Xbox Live*cough)

Consoles:

- Little Difference in graphical quality will make PC 'obsolete' for visual purpose. Reasoning? Obvious and already explained.

- Longer generation cycles. Reasoning? If technology is less important, then there won't be as much need to rush for future generations.

- Consoles will be cheaper. Reasoning? Technology gets  cheaper, though the decrease in price won't be as steep as PC's.

Graphics, always graphics, its like if the wii never happened.

Well, you could say Wii fits in the description of "cheaper technology, not as graphics-oriented", which is what I believe will happen more often in the future.

Consoles will benefit as there will be no large graphics margin between them and the PC.
PC will benefit as the "frequent" graphics update complaint will lose strength.
Bringing up a specific console? Doesn't seem to be the topic's purpose...

Consoles of course,it's the bigger market.

My prediction is that by the time graphics reach meaningful photorealism, the terms "console" and "PC" will be obsolete.

What I mean by "meaningful" photorealism is graphics that hold up in practical situations, and close up as well as far away. This is much further off than most people would guess. Gran Turismo 6 on PS3 will probably be pretty close to real racing footage at times. Next gen, we might see it on human models in something like a one-on-one fighting game (they'd probably need to wear masks to cover their faces and hair though). But these are extremely limited applications. It'll be more years still before you're able to wander around a dynamic environment that appears photorealistic, and then only from certain angles and distances. The important test is going to be in an open-world game like GTA: right now GTA games lag behind other contemporary games graphically because of the amount of content they have to handle. Even then, they're totally unable to render a real city -- we don't have New York with bustling sidewalks and block-to-block traffic, with every building's interior accessible. Once photorealism is achieved on a smaller scale, the task will be to incrementally increase that scale from hardware generation to generation. There'll be plenty of opportunity for different consoles and PCs to differentiate themselves from one another at this task for years or decades after the first "photorealistic" game is achieved.

The estimate I've heard from people in the industry for when we'll get there (the point where graphics don't matter anymore) is something like 25+ years. By then, I don't think consoles and PCs will be useful terms anymore. I'm not exactly sure where they'll be at by then: maybe they'll have merged together into an upgradeable living room set-top box, or maybe the tasks we use PCs for today will be spread across and integrated into many different household items. It'll be a different world, I'm sure of that much.

The entire business model of most console and PC hardware manufacturers, as well as the business model of most third party publishers is centered around the need for newer "better" graphics to sell their products ... Those that refuse to see the merit in a product like the Wii are rapidly going to go out of business because they can not see outside of the tiny mental-box they've trapped themself in.

Consoles have a major advantage because they can more easily switch everything up (new user interfaces, VR-Goggles, etc.) in order to continue growing the industry when processing power alone can not do it; by having a standard set-up for all users developers can more readily take advantage of the new-ness of a console and create something meaningfull.

There are many companies that makes HD games and are very successful at it.  Publishers go where the money is and in my opinion it's either budget or regular priced casual games for Wii or hardcore games for HD consoles and PC.

 Actually I would doubt the fact that Sony or MSFT business is centered around the need to upgrade to better/newer consoles seeing how they sell hardware at a loss and only make profit on software.

It's in their interest that consoles lifetime increases so that they have to develop a new gen less often....

The only company that makes a profit our of selling consoles is Nintendo.. So weirdly once they have saturated the market in a few years, they will be the one that will benefit the most from switching to the next gen financially..

 PS : and please spare us the 'developers that don't start developing for the Wii are doom crap..' There's plenty of developers out there not doing it and doing pretty well right now...