The length of this gen is an indication of diminishing returns, really. With previous consoles, there was a real limitation to what they were physically capable of doing at the hardware level. With the PS3 and 360, there isn't much that can't be actually done, it can only be done better, and faster. That wasn't true of previous consoles. GTA4 was impossible on the PS2/Xbox/GCN. GTA3 was impossible on the PS1/N64. Mario 64 was impossible on the SNES. FZero was impossible on the NES. Mario was impossible on any mainstream console prior to it.
There was no point in new consoles in 2009-2010 because the technology and tools available didn't warrant an new generation. I think we're basically ready now. 8 gigabytes of ANY kind of RAM (be it DDR3 or GDDR5) is an insane upgrade over 512MB. "Megatextures" are more than feasible with that much RAM (and yes, they are the future). GPU/multi CPU core compute operations will also be much faster, opening up the possibility of games having insane physics in the next gen as well. GPU compute and the RAM upgrades we're getting with the new consoles are the biggest deal, but besides that of course we get faster shaders and faster everything else. All that wasn't ready for prime time in 2010; the consoles would have been better for sure, but not drastically.
Graphics will be much improved on the new consoles because of things like megatextures (they only require one to three passes for 90% of the scene to work because multiple textures don't have to be blended together and a megatexture is one texture that can be "batched" unlike having multiple textures). Gameplay will be improved because of better physics and the ability to have many, many more instances in the game because of GPU compute and greater RAM. Plus, the developers now have the tools to take advantage of the hardware unlike 2010. The reason this gen lasted so long was because hardware and tools needed to improve enough to create the generational leap we expected. Also, the consoles were pretty expensive at the start... they had a long way to fall.