Realtime graphics have really made great strides in the last couple of years(after the current gen consoles were released). I do 3D animation, and now I'm just beginning to use tools that leverage the GPU(instead of CPU) for rendering animation. GPU is much faster, but there are certain limitations.
Anyway, when the big game consoles come out, they have a pre-determined life cycle that the company sticks to. The PS3 is supposedly set to have a 10 year life span -- so we have another few years to go. The XBOX and PS3 are stuck with their outdated hardware, while the PC world makes incredible strides around them in whats capable to display with a CPU/GPU.
The next generation of consoles will have graphics that look almost like Avatar.
http://www.next-gen.biz/news/analyst...an-makes-sense