Well, looking at the worldwide charts, I can see that Wii software sales are dominated by the same handful of games week after week.

Seriously, what else do they need to display other than Mario Kart, Wii Fit, Wii Play, SSBB, Galaxy and a few new releases (Wii Music, Animal Crossing)? Just a theory :P

Can't say it's the same story in Australia. Wii and DS games take up the majority of shelf space in my area.

In the last two years in Europe (UK, France Belgium, Netherlands), i have seen a considerable change in store layout with regards to the different brands.
At first, the X360 had the largest display, in the best located part of the store. The PS3 was placed beside the X360, with the PS2 beside that. Somehow, in many stored in a number of countries, the Wii would be located elsewhere in the room sharing a small space with the DS. In stores there would always be a crowded patch, where you could be certain to find the Wii and DS software (i am always shocked at how many senior citizens buy DS games).

Nowadays, a lot has changes have happened as far as my anecdotal experience. Video games in general seems to take a much larger part of the room at stores that also sell CD's and DVD's.
Maybe not surprisingly, the DS has gained the most shelf space and can be found in the most prominent place in the room, though sometimes this space has to be shared with the Wii (UK , France seem to have more Wii shelf space while Belgium, Netherlands, more DS space). The X360, can now be found next to the Wii and DS, with a maybe disproportionately large shelf space (though sometimes taking the most room space in stored dedicated purely to selling games), whilst the PS3 has now been doomed to a hidden corner somewhere in the back of the room with the PS2.

 That raises an interesting question.  We know that Xbox/PS3 games (most) tend to sell best during launch but then quickly drop off the charts, but Wii games sell in small amounts but at a constant rate.  SO, do retailers rather have a steady sale rate of games or do they rather have sporadic sales during launch dates?

Why would retailers have big game demo areas trying to sell people Wiis? They have none to sell and they already sell themselves. They do have PS3s and 360s to sell, so that is what they are pushing.

Having a huge Wii display with consoles to play will not help sell any more Wiis.

Software shelf parity is another issue. Most store that I have been to have had their Wii shelf space growing over the past year.

Well my local Game and Gamestation shops usually give priority to HD Twins with them both being closer to entrance and Wii/DS in the Back, yet space Wise it is Ninty that takes more space.

Display is mixed, but usually 360 dominates.

I think the biggest factor is that retailers don't have to put Nintendo products out front-and-center to attract buyers because the Wii & DS will sell whether they do so or not.

Sony tends to get prime real estate positioning in the store because it needs the extra push, and because Sony sells a lot of other products to Wal-mart other than just the PS3... TVs, DVD players, BD players, etc. They have a little more leverage with retailers because of that.

In my town, PS3 has the least shelfspace by far, and the Wii has a lot of shelfspace. However, there are mainly the same games in shelves, most retailers here don't want to stock on Wii multiplatform games.

Most gamestores I go to, the 360 and wii are showcased perfectly with ps3 being biased against.

I cannot tell you why they have a small self space for the Wii, but I can tell you why they put it in the back. It is the same reason that you will find the electronics and toys areas in the back of Walmart. It is all about getting you to view stuff that you didn't originally go there for. They know alot of people are going there to buy Wii's and they want you to notice the other systems on your way to the Wii's. They are hoping to peak your interest and that you may buy anouther system also. If you never walked buy the other systems,(and you were only there to by a Wii or a game) you would never think about the other systems.

It is the same reason you have to walk past clothes and shoes to get to the desired items, electronics and toys. They are hoping you might pick up something else along the way.

Guys, there are deals within deals happening for this sort of thing. Yes, companies pay for prominent positions for their products all the time. Even if the Wii were in front, it would not be because it "deserved" it, but because Nintendo reached an agreement with that retailer.

Shelf space is a slightly different issue, and is not something most retailers are willing to be payed off on. Retailers are willing to sell the rights to where the product in their store is placed, but they tend not to be willing to let companies decide what that product is.