I don't think we're going to see a serious decline in computer gaming for a long time.
With the release of every new console generation the doom sayers have predicted with great gusto that "the end of computer gaming is upon us", because "the new consoles have much better graphics than the PC".
Whilst it's true the PC cannot compete directly with the new consoles at the moment for price/performance (although with the PS3 at £450+* the gap isn't that huge), what it can do is beat them hands dow in the diversity of the games available, the games themselves, cost of games (PC games don't have to pay royalties to MS/Sony/Nintendo to get published for the platform), and the fact that the PC can still do other things besides play games.
I'm using a machine that hasn't changed much in two years, the only major upgrade in that time was a new videocard last year (I didn't upgrade that when the rest of the machine was done), and it plays current games quite nicely, maybe not as well as a dedicated machine but good enough, and at a lower total cost than I suspect the next gen games machines will cost.
Remember when working out the cost of a games setup there are three main things to compare.
1: System
2: Games
3: Accessories
The Consoles can beat any gaming PC on system cost, in large because they are dedicated hardware (no need to worry about making it compatible with things like spreadsheets), but also because they tend to be heavily subsidised to get you to buy it.
This leads onto the games.
The PC for all we complain about the games being buggy tends to have the games much cheaper than the consoles - I can regulary get new PC games from about £18, compared to Console ones that normally cost £25 (GBA/DS) to £40+ (Xbox 360) from the same retailer.
This is in part due to the fact that the console manufacturers charge companies wishing to release games on their system a licencing fee, which adds to the cost of the game before it even leaves the replication plant, I beleive they also have stricter controls on how much retailers can knock off the RRP (not hard to do when you control all the replication of the games for the system).
Then we get to the accessories.
Traditionally to get any real use out of your £300 new system you've had to pay out for not just the system and the games but also things like memory cards (a great, not so little earner) to get proper functionality from the games/system.
All of thiis means that yes the PC is a more expensive up front outlay for gaming (and always will be, especially if you much have the latest greatest cards), but over the life of the system it tends to work out about the same, or even cheaper, especially if you buy a lot of games (and thus keep paying an extra tenner or so for the software, then another tenner here and there for the memory cards).
The one area where PC's cannot compete with consoles at the moment is in multi-player gaming where the consoles regulary have 2-4 people playing on a single screen - however that is in part because in the past it's not be cheap/easy to link the consoles together, now they are getting networking as standard I strongly suspect there will be less 2-4 players per console games
I see this as unfortunate as it is one of the consoles strong points (you could have great fun with your mates on a single system), and fear the companies will take the approach that "well you can still play networked games" (which would also let them sell more copies)
*I think it's meant to be.
