Just because these CPUs and GPUs are in a console doesn't mean that we should throw away years of knowledge from the PC industry - performance doesn't come out of thin air, and peak performance is almost never achieved. Clever marketing however, will always try to fool the consumer.
And that's what we have here today, with the Xbox 360 and PlayStation 3. Both consoles are marketed to be much more powerful than they actually are, and from talking to numerous game developers it seems that the real world performance of these platforms isn't anywhere near what it was supposed to be.
It looks like significant advancements in game physics won't happen on consoles for another 4 or 5 years, although it may happen with PC games much before that.
It's not all bad news however; the good news is that both GPUs are quite possibly the most promising part of the new consoles. With the performance that we have seen from NVIDIA's G70, we have very high expectations for the 360 and PS3. The ability to finally run at HD resolutions in all games will bring a much needed element to console gaming.
And let's not forget all of the other improvements to these next-generation game consoles. The CPUs, despite being relatively lackluster, will still be faster than their predecessors and increased system memory will give developers more breathing room. Then there are other improvements such as wireless controllers, better online play and updated game engines that will contribute to an overall better gaming experience.
In the end, performance could be better, the consoles aren't what they could have been had the powers at be made some different decisions. While they will bring better quality games to market and will be better than their predecessors, it doesn't look like they will be the end of PC gaming any more than the Xbox and PS2 were when they were launched. The two markets will continue to coexist, with consoles being much easier to deal with, and PCs offering some performance-derived advantages.
With much more powerful CPUs and, in the near future, more powerful GPUs, the PC paired with the right developers should be able to bring about that revolution in game physics and graphics we've been hoping for. Consoles will help accelerate the transition to multithreaded gaming, but it looks like it will take PC developers to bring about real change in things like game physics, AI and other non-visual elements of gaming.