PC games and console games preform different roles in the game industry as a whole. The PC is generally the platform for innovation, while the console is the sector of the market more geared towards larger profits. These roles are inherent to the platforms themselves, and chances are they will maintain thier respective positions in the game industry.
The PC is the leader in innovation for a number of reasons. In terms of hardware, the PC improves at a pretty much consistant rate on average, with a new generation of hardware (PI to PII, GF3 to GF4, etc) coming out roughly every 6 to 10 months, and incremental improvements (increases in clockspeeds and storage, etc) occuring at an almost constant rate. Consoles in comparison follow hardware cycles, with a new generation of consoles coming out every 2-4 years, usually making quantum leaps over thier predecessors. This generally means that with the exception of about a 3 to 6 month period after the release of a new console, PCs are more powerful (not necissarily on average, but at the upper end) then consoles in terms of hardware. Since the PC is on the cutting edge, nearly all of the computation and storage intensive innovations are made on the PC.
The PC is also an easier and less risky platform to devlop for. As much as everyone hates Microsoft, they are arguabley one of the most 3-rd party (ie external developer) freindly operating system makers out there, both for hardware and software developers. Anyone can download any one of a number of free compilers and write software for Windows (granted that the free compilers are not exactly the most powerful and fast development tools, but they do exist), then publish and distribute it on the internet and on burned CDs without so much as leaving a message on Microsoft's answering machine. On the other hand, to develop for a console, a developer must get the console's manufacturer to approve the game design, pay a licensing fee to release a title on the console, have the console maker do a QA approval of the game prior to release (including making sure the game fits the 'image' of the console), and usually sign an exclusivity agreement with the console manufacturer denying the developer the right to publish the game for any other platform for at least a significant amount of time.
Console companies can get away with this kind of system because the market for console games is so large compared to the PC market that developers know that having a successful console title will virtually guarantee higher sales then a successful PC title. Because of the exclusivity agreements and the publishing and production systems for the consoles, console manufacturers can also almost completely control thier market and decide on which games even get to stay available on the internet for distrobution. Yes, this does ensure that the console games are of a more consistent quality then PC games because of the QA approval process, but it also discourages innovation because if a developer tries something new in a console game and it fails, the developer ends up having paid a large licensing fee as well as having a game that it is contractually obligated not to sell for as long as the exclusivity agreement lasts.
On the other hand, any devoted guy in a basement can create a PC game and release it virtually for free on the internet, so while the possible rewards (high sales) of releasing the game are not as high, the risks (licensing fees and contractual obligations) of doing so are far lower, and thus PC developers are able to afford to take larger risks, translating to more innovation.
Lots of people complain about the fact that PC games are generally less reliable and that PC gaming is more expensive and complicated. That, to some extent, is inherantly true to the system, but it is exacerbated by the current situation in the game and computer industries. Game publishers tend to rush PC games out the door, depending upon successive patches to bring the game up to snuff. Hardware on PCs is not standardized, which is both a strength and a weakness of the platform. The PC industry has convinced a large segment of the buying public that a $600 dollar PC complete with monitor and speakers is fully capable of running the highest end software that will be released 5 years from the time the computer is purchased. Finally, alot of software developers don't provide very good backwards compatability and graceful degredation, but to some extent, it would be both technically and cost prohibitive to do so (for an extreme example, yeah, sure id could release Doom 3 so that it could run on every system all the way back to a vaccum-tube computer with a 64X64 resolution 2-color display, but it would take them decades to develop it, and would mean that the game wouldn't be able to support many more modern features).
So, before you say that PC gaming is dying or that consoles are the only real viable gaming platforms, just keep in mind the benefits and drawbacks of both. Both are necissary for the industry to thrive, and both should be supported.
