For proof that we've come one helluva long way from Mario Brothers, witness Kara is Self Aware, a short film intended to be a demonstration of the new capabilities the latest motion capture technologies can bring to video games. And, of course, the power of the consoles themselves, which it should be pointed out will be replaced soon enough by the next generation.
It's also a really nifty story, one that should be fleshed out (as it were), if it's not already being finished.