Bear with me here, because this is a long one, but if you read through all of this wall of text, its very worth it.
We have to start placing limitations:
When they make bots talented enough to beat people at PvP on an mmo.
When the cost to make a game eclipses possible profit. I.E. they would have to make a game extremely expensive because it was to expensive to make.
Like if a game used Quantum thought processes.
Quantum thought processes in general are scary, imagine a computer that was designed to learn and never stop learning. Quantum logic is extremely difficult to explain. Just imagine, for a second, that every time you played CoD4, the A.I. learned from the mistakes it made, and was capable of analyzing everything you did and learning from it via the use of calculating the probability of every action you took, and what thought processes lead up to actions. Pretty much analyzing probable thought.
Here's another explanation
Imagine a forensics lab which has some apparatus to measure the speed of a bullet fired from a gun. Under carefully controlled conditions of temperature, humidity, pressure and so on the same gun is fired repeatedly and speed measurements taken. This produces some distribution of speeds.
Though we will not get exactly the same value for each individual measurement, for each cluster of measurements, we would expect the experiment to lead to the same distribution of speeds. In particular, we can expect to assign probability distributions to propositions such as {a ≤ speed ≤ b}.
This leads naturally to propose that under controlled conditions of preparation, the measurement of a classical system can be described by a probability measure on the state space. This same statistical structure is also present in quantum mechanics.
Long story short, for those of you who don't speak math: If you shoot a gun three times, no matter the outcome, the speed will Most likely be mathematically consistent. Even plainer:
If you know where the bullet was going, you could tell by the impact how fast it was getting there. It's really quite amazing.
Once computers have the kind of intelligence to consistently and accurately predict the outcomes of experiments like the one above, they will be able to apply this mechanic in every situation it's presented with. We'd have to consciously make AI less capable, otherwise games wouldn't function.
Once we work out Quantum math and autonomous Computational thought, that's when Game advancement stops. Another thing, The PS3 can perform 3 trillion (Last I heard) basic computations a second.
Most of those are just used for Graphics (And if you've ever wondered how graphics work out, they revolve around Matrix Math, which is nothing new under the sun since the 30's. The only reason we couldn't use them was because there weren't computers at all, let alone powerful enough to compute them.
~Pennyy
P.S. The other thing I thought of is where we are capable of creating something that graphically surpasses our conception of reality. I can't even begin to explain that.