Next year's iPad will most likely be more powerful than the XBOX 360 and PS3 (it already has more ram and supports a higher resolution). That will be a big deal. As it stands, it already does better graphics than last generation's consoles. Add in the really high resolution display, and you can see why console gaming will become more niche.
People have limited money to spend on electronics, and as gaming on consoles becomes better, more people will play games on them instead of buying dedicated gaming machines. With technology like AirPlay, consumers can play tablet games on big TVs.
The same hardware that is in tablets makes its way to phones, which is going to make portable gaming systems very niche. We may even see phones next year that can create better looking games than the XBOX 360 and PS3.
Cloud gaming is on the way, and this will further erode consoles. You'll be able to have a dumb terminal of a TV or set top box that uses servers to render gaming content. Better looking games will naturally happen as servers become cheaper and more powerful.
None of this will replace the console gaming experience for those that really want that experience, but for the more casual audience, it will begin to erode it. With tablets, AirPlay, cloud gaming, etc. what future does a console like the Wii have? Phones can even be used as motion controllers with all of their sensors built in.
There will be a future for XBOX 360 and PS3 style consoles, but I agree that it will be more niche and that the next generation will last a long time. Because of this, I hope the next generation of consoles are built to last a long time.