If by incredible touch user interface and unparalleled internet funtionality you mean obsolete, then you'd be absolutely right. Lest we forget a little thing called firmware updates, negating many hardware limitations.
I think after this coming spring, you'll get a better picture of what the state of affairs are with the PS3. Not so sure where MS is going to take the 360 after Halo 3 as Halo 4 is undoubtably a long ways off and in between that time, Sony is going to have some amazing games (MGS4, God of War 3, and Killzone 2, for starters). Either way, this is going to be one hell of a console war and there are going to be a lot of amazing games.
I think that the main reason is that it is much more expensive than console gaming. Over the last 5 years, what we've seen is a closing of the gap between the graphical fidelity of PC's and consoles. Unfortunately for the PC, consoles are emerging as the more economical and practical option. But don't get me wrong, I love my PC and there will always be a large market for PC gaming. Just never as large as the console market.
I think that games, like any other medium or art form, are an unfortunate sign of the times. With nothing but the war on terror and Iraq on the news for the past few years, its inevitable that you're going to see games that reflect a nationwide sentiment of fear and need for release. A lot of new games like Ghost Recon, Counter-Strike, and even Halo just build off that.
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