I see an element of truth to this ...

Microsoft and Sony are probably both going to take a step (or two) back in terms of processing power because at their current level the high price and large size of their systems makes them undesireable. At the same time Nintendo will probably take a step (or two) forwards in terms of processing power because the risk factors associated with releasing the Wii will not be present in their next generation console, and as they increase processing power (even a little bit) development costs can only be managed by developers and not by limitations in the hardware. In the end, the difference in processing power will be less dramatic in the next generation and (hypothetically speaking) the order of most to least powerful console could even be switched up a little bit.

On the user interface side of things ... Neither Sony nor Microsoft have ever been all that well known for designing something new and exciting, and they mostly just produce incremental improvements on what has been done before. With the Wii dominating their high-powered feature rich consoles entirely based on the demand for intuitive motion controls, I'm positive that Sony and Microsoft will both be looking to capatalize on that by producing their own Wiimote-like controllers. For Nintendo, they can take a far more defensive position with their next console because people are probably going to look at whatever they offer first before they decide which console to purchase ... as long as Nintendo doesn't do something outrageously stupid they will (likely) be the market leading console in the next generation.

I think you underestimate Nintendo's foresight. 'Paradigm Shift', 'Revolution', 'New Standard' were thrown around a lot. 

Sure they probably had conservative estimates and even lower estimates for the public but especially with DS taking off like it did. I'm sure they knew they were onto a winner.

That said it'll be HD and probably priced at $299 - Nintendo definately priced Wii too low at launch and would have been ripe for a cut to $249 last year. Other than that, it'll continue with the ideals of the new generation market including fun pick up and play games for everyone and their own coined term: All Access Gaming

Oh, it's a given that Nintendo knew that they were on the verge of something big--the response at E3 2005 testified to that.  But the unprecedented shortages, despite sales, for the first two years of its' life (which haven't been completely alleviated everywhere), showed that they can afford to be less conservative from a technical standpoint with their next system.

@ thekitchensink: ahh I see what you mean.. I think they'll still be rather conservative with their next system too though.. It's just what they're like

From a technical standpoint?  Wha?  The Wii is th only system they've ever taken this approach with.  The DS, in addition to its' new forms of input, was a graphical powerhouse when it came out (no handheld had ever dreamed of producing a polygon, previously).  Gamecube was roughly on par with the Xbox in the last generation, and more powerful than the PS2.  N64 was twice as powerful as the Playstation, SNES was significantly stronger than the Genesis, and the NES blew any console released previously out of the water.

You could argue that the first Game Boy was behind its' peers, powerwise, but that was more due to unacceptable battery life at the time.

No I meant with supply lol - sorry misread your post :P

And yes I'm well aware that all their other consoles have been very powerful for their time.

I agree with many of the posts but a lot of has to do with the economic climate at the time.

Depending on who you listen to this global recession can still be around for the next 2 years, maybe worst than present, maybe better....maybe same.

Then price becomes a definitive factor.

I think the first to show their hand again will be MS. Nintendo can happily chill, they are the run away winners and there is nothing I can see that will change that.

Sony has no choice but to hang in there for as long as possible.

MS promoted their console as a harcore system therefore they must keep this image (and try to get some casuals at the same time).
They have to up the graphics abilities to whatever is possible by time of its release. They might (I am pretty sure they will as it's the MS way) copy the wii remote. Plus the home entertainment gizmos.

Nintendo is in a great position. They can probably just reproduce a system similar to the current cheap 360 core and that's it. No one can beat them on price.

So yes they may be similar (in terms of gaming) when all are eventually release but then media format (as now), add-on entertainment capabilities etc., can be very different.

THIS. This is why I don't understand Mircosoft not developing it's First Party more. If what is predicted holds true, then Sony and Nintendo have the best leg up. Microsoft will have to try and persuade more developors to make their games exclusive, and then they may only be TIMED exclusives...

2 years? seems only Microsoft would release a new system around then, dont expect sony or nintendo too.

It would be scary if all 3 consoles are identical. Then it would be like shopping for different brands of DVD players.