IGN posted an article about the Future of Game Design - something which doesn't focus on the technology evolution of gaming but the evolution of features in gaming.
The article's emphasis on what a totally immersive game should "feel like" is important - it's not about how many textures or render passes you throw at an engine, it's about how you should be able to interact with your environment. One idea I particularly liked was the concept of being able to transfer your player characters into sequals of a title... something done in ye olden days but not seen too often as of late. It's a great idea, especially with RPG's, and fosters an attachment to your character that actually makes you care about the series.
It also made me think about the old King's Quest series. It's what inspired me to get into gaming in the first place... figuring out how to make a custom boot disk to manage my @#$!$#% 640K of base memory and still load MSCDEX.EXE took a lot of research. But in the end, hearing my lovely 16-bit Sound Blaster belt out all the speach from my characters in King's Quest V was worth it. And when VI actually ran in Windows 3.11 with amazing 16 bit color depth... I was just the mac of all boot-loading h4x0r skillz. I lived in the kingdom of Daventry until DooM quaked everyone's world.
Speaking of Quake... I remember looking at the alpha of Quake that John Carmack released, prewarning the world that everyone would now need the new Pentium's floating-point unit. Unfortunately I had a 486DX2/66... with while it had a math co-processor didn't quite give the framerates it needed. In fact, that's the first time I ever worried about frame rates... in a room with two floors (both were visable at the same time and had entities over top of each other), a few crates and a nailgun in the center.
I upgraded two semesters later. But it wasn't until six months later, in a fit of self-loathing and depression, that I made one of the most evolutionary purchases of all: the 3dfx Voodoo 3D OpenGL accelerator. While it couldn't do 2D content (you had to use a pass-thru cable which would use your standard video card for desktop stuff) it was the first card dedicated to blitting ploygons as fast as you could handle.
Suddenly QuakeGL kicked the door open. Textures were smooth and no longer pixelated. Water was transparent. Windows were tinted and see-thru. Explosions launched particles everywhere. The revolution had begun.
Next up, believe it or not, was Tomb Raider. It's 3rd person camera angles and OpenGL rendering engine made everything look damn pretty. Not only that, but she could climb, scale, roll and dive like an acrobat. The CPU didn't need to be dedicated to rendering - it could handle larger character animations as well.
Say want you want, but progress has been incremental ever since. Yes, now we have volumetric shadows, per-pixel lighting, glistening texture shaders and refractive water. System Shock and Deus Ex represented another step in "gaming-as-cinema," where you feel like you're the lead role, director and writer of your own action flic. Your character evolved, your choices weren't predetermined, and your actions required forethought. Storytelling again took center stage - and while gameplay became increasingly nonlinear it was still largely reminicent of King's Quest and 7th Guest.
Half Life 2 seems to be the greatest example of all the incremental advances being coalesced into a single release: lighing is pretty, eyeballs are shiny, water is watery, NPCs react in intelligent ways and the storyline is engaging. It's the fruit of our cooperative looms.
So what's next? I think it's not going to do with technology per se, but instead who is going to create new genres for the gamescape out there. The MMORPG genre is a new one that has shaken up conventional ideas about gaming and social interactions, and has made player networking a central part of the gaming experience. This type of virtual society has definitely split games into two ranks - the massive multiplayers and the single players. While consoles are just now jumping onto the multiplayer bandwagon, computer gamers have lived there since QuakeWorld. People (such as myself) who don't have the time to dedicate their lives to 24/7 character advancement often live in the single player or quick competition multiplayer world... ye olde frontier. Some people like to leave a game then come back two weeks later to find it exactly how it was. And some interact with enough difficult people during the day that the last thing on their mind is dealing with some dufus player-killer.
I'd like to think that the next genre of single player gaming will be driven by small developers willing to take a risk. Look at Uplink - it was small, involved, engaging, brilliant. The user interface was the game, and you really were a hacker. How freakin' genius is that?!?! Uplink, in my eyes anyway, set the standard of what hacking should feel like in a game. And that kind of genre-eluding creativity is what will lead to the next... thing.