Sure upgrades will be needed probably by the mid of next console cycle. That's how it goes in PC gaming, you trade freedom, mods, free online, dedicated servers, cheaper games, all for a higher cost of entry. But it will be a few years before anyone has to worry about that and even then the increase in how much a game demands wont be very high.
We have already gone from barren rooms in the PS2 days to a normal amount of clutter and geometry in todays games. Without their being much to increase geometry wise, and with studios really being hamstrung on how much they can spend building a game world, the increase in what tomorrows consoles do over todays isnt going to be very high. They wont be building bigger worlds, and they wont really be building more detailed worlds. The only areas that will really see improvements will be mostly in resolution but also in AA methods, lighting, shadows, and overall quality of image and textures.
The amount of people that plays these games has pretty much topped off. Everyone who wants to game on a console pretty much already does. And right now any big increase in the prices of games is going to end up being offset by less games being sold. So there isnt any real room to increase budgets for game development. Dont expect anywhere near the same increases in what games look like compared to last gen. Most of the increases will be to IQ.
What I would really like to see is better AI. But nobody wants to spend any money tackling the most challenging problem facing the future of gaming. not much return on that investment.