it's been like that for a while.
Very few games actually come close to using all the space of a DVD, which is why it's only recently that they've made the switch from CD to DVD for a lot of games on the PC (which tends to have to allow for many more variables than a console, and much bigger textures etc available).
Most games unless they have masses of FMV don't need masses of space, I suspect that games like FF7 if it had been done with the footage actually rendered in game (rather than as FMV and pre rendered backgrounds) would have easily fitted on a single disk rather than the 3 it was on (or 4 in the case of the PC version).
The GC is a good example of what can and is done via relatively smart programming and a small amount of storage, rather than using loads of space and a FMV (look at some of the cut scenes for things like Metroid Prime. With the improvements in system specs you can do better and better without resorting to FMV to get the look (you'll need more space for textures, but that is still going to be a lot less than what could easily be used by pre-rendered video etc).
It's much like PC hard drive sizes, you can easily fill 500gb if you're not carefull and don't care about the fact you've got a lot of space that is used without needing it to be, but you can get along fine with <100gb (or even <40gb) if you manage that space and don't go filling it with video files that might only get used once a year (or in the case of games, once per game).