Moore's law is unabated. Progress is as fast as ever before.
What is happening now is slightly different. For one, it is the consoles who are driving the developers of games, instead of the PC. Xbox 360 was born in 2005, almost 6 years ago. FS3 came one year later. They were very good graphical machines, and because they are highly predictable (if you develop for one xbox, you have developed for every one), graphic engines were able to optimize to amazing levels, and we have BF3 as a testament to that.
Thing is, the pc continued to progress, and now we have in the pc world something like 10 to 20 more horse power than in the consoles. Highly unoptimized, though, and considering that the games are developed for the consoles and not the pcs, it's understandable that people are "bored" by the lack of progress.
However, I would recommend people to watch the best games of 2003, and compare them with 2007. And then watch the BF3 trailer. There is no denying that huge improvements are being made. They are just getting more and more subtle.
We can also see that the current gen of consoles is one generation "behind" schedule, because of this thing called the wii. The wii forced PS and Xbox to focus not on graphics but on this interactive gameplay. The "eight" console generation is defined by the kinect and the move instead. But there are new consoles in the horizon. Either in late 2012 (unlikely) or in late 2013 (more likely) we will see the next generation of consoles. And they will be 10 times more powerful than this generation.
I'm not suggesting much more than ten times because if they tried to do the same thing they did in 2005 with amazing specs on the consoles and 600 bucks price points, they would fail real hard in the market. Simply put, the graphical differences will not be so compelling as they were until 2005. People will say "ha, Ps3 graphs aren't perfect, but they are just fine for my everyday games, and that's ok, I won't spend 600 bucks on better graphs than these anyway". But they will pay 300, 400 in the first months.