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trying to think back when i young enough to remember
i remember arcades being a pretty popular in gaming seconded by home entertainment system such as the nintendo
i can't quite remember playing an atari even though my brother did own one

i also remember the first few games released for an IBM PC when PCs were still running on command prompts with little to no GUI

so games kept growing in the household
arcade popularity dies a bit from the growing household entertainment
why spend all those quarters on arcades when you can just play at the luxury of your own house? and PC games start to rise as well

it seemed out of the blue when sony came out with playstation to me since i wasn't really following the news on it
my dad just happened to get his hand on one from his job, which it was pretty awesome that we got it

i was in awl with the graphics back then, and some of the new games, but mostly the games released were fun
tomb raider was a good puzzle action games
ace combat was the an actual flight sim, not like R-type or starfox
and several other games came into existences which were fun to play

its not to say that the older games weren't fun, but things got more interesting. the technology grew to be able to execute all those interesting things. can you possibly imagine an nintendo running a real-time physics sim. heck, mario couldn't even mimic much real physics, he pretty much stops on a dime.

other technology examples, you can't possibly fit some of the games onto a cartridge anymore, processing power needs to be increased as well to be able to do everything the game is doing. one of my dreams in a game is to be able to play a game where everyone and thing is interactive, just like real life. we are coming closer so that dream can be a reality, but still it requires much more resources.

a console is a computer, using the term loosely. its a machine no matter how you look at it. so no one should be shocked that these machines include all these features where the developers imagine to be useful.

look at a microwave, is it really necessary to have a button that says popcorn on it? or have a clock built in when all you really want is just to have a timer to microwave your food. BUT designer added that button because of the popular usage of popcorn and microwaves.

since technology is only growing more and more
it is only obvious in my small mind, that games will become more complex and utilize more resources. so instead of just making the bare minimum, corporations like sony and microsoft decided to throw as much high tech stuff into the consoles so they don't have to regret it later on. these consoles gives a standard format for which games will be executed on. so if the standard is high, all the better for hitting performance limitations.

a really simple look at how games have been eating up resources like its nothing are computer games
compare the system requirements for a game like Starcraft, a 1998 game, takes up for windows compared to Bioshock, a 2007 game.
It has been a constant growth in asking for more CPU power, more HD space, more RAM, more GPU power.

but having more raw power is not the ONLY problem games face
take a look at how nintendo tackle design rather than worry over technology

you used to be unable to play a shooting game like Time Crisis outside of an arcade, that arcade was built and designed for a shooting game
now almost all consoles can simply design a game to support similar shooting abilities given at the arcades. However, if you remember in the PS2, you need to buy a different controller for the game. Wii skips that step and makes it a convenience because that concept of point and click is pretty much represented in the wii remote. Its just like how it is just a convenience to have that "Popcorn button" or "add a minute button" on a microwave. Its not necessary, but it helps out a lot at the end.

so recap?
design of how the user is going to interface with the game is important
whether the interface is a controller with several buttons, or a keyboard and mouse, or a joystick with buttons, or a fake guitar with buttons, whatever it is. it is important because you can't just think and make the game do stuff. at least not yet lol

raw power of the system is also important
i don't care what you say about not needing all that power, because in the end all that power is being used so you can actually play the game instead of sitting there staring at a motionless screen