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Makid
Of course, we've all seen films that have plots along the lines of "The game is indistinguishable from reality!!! Ohmygod!!!", and I hope that we'll stop things before they get that far, but there is a limit to what games can achieve. The fact that programmers have to write every single bit of a game themselves means that Holy Grails like truly non-linear games are impractical, and the best that we're ever likely to able to make will be a linear game with a few user-defined plot twists (and, hey, we can do that already - just look at Deus Ex and Blade Runner). I think that realism is also limited in prospects. Quake 3's curved surfaces are undeniably lovely, but there's only so many polys that you can push into a level, and so unless we develop a completely new system from scratch (a step which I shouldn't think any developer will be bold enough to take for some time) then what exactly are we going to achieve in the future.
There's also a danger of misunderstanding what progress is. Progress, in my opinion at least, isn't simply a case of making a more beautiful game. That's nice, but what really matters is a well thought out plot, and clever, original design. And, if you'll forgive me for being so pessimistic, decent ideas are few and far between as it is. The future might not be as lovely as you think.
With the new consoles:
Dreamcast
PS2
GameCube
X-Box
Indrema
Nuon...
Competition will be at its peak meaning better games at more competitive prices. Never before has it been so good for a games player.