Technology company AMD, who supplied the graphics hardware for the Xbox 360, claims that the next Xbox will be capable of the level of graphical detail seen in James Cameron's movie Avatar. Even on PC, that kind of technology just isn't here yet, but AMD claims the Xbox 720 will launch with it.
While AMD would not confirm they were actually working on the 360's successor, director of ISV relationships at AMD, Neal Robison, stated that gamers have a lot to excited about.
Robison also mentioned that the A.I. and physics capabilities of the next-gen hardware will allow for every pedestrian in a game such as Grand Theft Auto or Saints Row to have a totally individual mentality, meaning when you shoot a gun or run someone over they don't all just do the same thing. There will be no more mob mentality, where everyone just screams and runs away; every NPC will actually be an individual character.
Source: August issue of OXM (U.S.)