Next gen is graphics that really push the system (UE3), physics that take up almost an entire core all the time (destructable environments, environment interactivity, ragdolls, blended animation and much more), and gameplay that pushes the boundaries of what we are used to.
Fortunately engines like UE3, Havok, Mekon give developers the chance to create something great without spending years on just the engine. A good example in the console world would be DMA/Rockstar and the Renderware engine that enabled them to create GTA3, which truly did the impossible back then.
And people complained GTA3 ran poorly and didnt look all that hot, and even the press blamed the Renderware engine. A few years later here we are and GTA:SA still uses the same engine as does Burnout Revenge. Tens of developers have tried to outright rip off the ideas, graphics, physics, gameplay of GTA3 and failed.
I feel sorry for the developers that dont realise its time for something great. And I feel sorry for the people who purchase mediocre last-gen crap made by the said developers who smoke-screen us into thinking thats the best there can be.