Traditional RPGs are still going strong and get quite a lot of sales, but as a gamer, the future is with freedom of choice and on which side your character is on, not always the "save the world" hero that we've seen a bazillion times, in that respect, western devs are eons ahead of eastern devs.
KOTOR is a good example but its nothing new, its been done on PC western games, heck, bioware's older RPGs for example, i would even say that KOTOR is a bit dumbed down gameplay mechanic wise compared to some of bioware's past work, but the story and more importantly, the franchise behind KOTOR, probably helped console gamers look at it beyond just "another D&D game", which is what it is, just with a different look than the traditional one.
While i havent played Fable, from all the impressions i've read and previews of it, its what i want RPGs to be heading. Just the ammount of AI complexity in fable makes it one of its kind. It must be crazy the ammount of data being calculated in the background for each citizens you encounter to give you a believable reaction depending on what you've done before and if he heard of it or if you did something good or mean to him in the past, etc. No more "run up to villager, press dialogue button, blah blah blah, press dialogue button again to see if the texts change, a third time, oops, he's repeating himself, move to villager #2". RPGs where the NPCs have 2 lines of predetermined dialogue to give you and doesnt give a shit of your exploits, gone with them. A game where you're to become an hero, the surrounding should react to it, which was my main problem with morrowind.
