In the past people have speculated that Microsoft would release a portable Xbox to compete with the PSP and 3DS. These dreams of have yet to materialise, but now they don't have to, with claims that the next generation of Tegra (and presumably other) SoCs will match and exceed Xbox level GPU performance.
The slide above shows NVIDIA's projections. The dotted line is the current trend for console, PC and mobile markets, and the solid line is estimated theoretical performance.
Portable gaming has become a large aspect of smartphone use, with games such as Angry Birds and Temple Run taking the crown. On the Android side, many people emulate consoles to vastly improve the range of quality titles, and Sony is expected to extend their Playstation Suite to other Android based handset manufacturers.
It's amazing that phones have caught up to consoles, and will be at worst one generation behind come the next Xbox in a couple of years. Naturally there are critics who aren't impressed with the fast growth of mobile graphics performance because of the obligatory 'PC is better', to which I quote Louis C.K, "everything is amazing... and nobody is happy".