PC Gaming is more focused than it used to be. It used to be, especially after Half-Life came out, that the best games all around were on the PC. Best graphics, best gameplay, best stories.
Then, when the PS2 and original Xbox came out, console gaming took a major leap forward, especially in the sports gaming and shooter genres, which are the most popular genres right now. So if you want to play any of the "big name" shooters, you pretty much need a console.
The PC is still king when it comes to genres like RTS and most RPGs, and of course, MMOs. Any attempts to make RTS (which is my personal favourite genre) games on consoles have either been laughably difficult to control or horribly watered down.
The biggest problems with PC gaming as it stands today are things like:
1) DRM. Piracy is so much easier on a PC than on current-gen consoles, so the PC versions of games are shipped with stuff like online activation, background programs, etc. The majority of console games don't have DRM, simply because it's a lot tougher to pirate them.
2) Technical issues. It was mentioned above, but it bears repeating. If I shell out the fifty bucks for a game for my Xbox, when I put the disc in the console I'm about 95% sure it's gonna work. Xbox game = works on Xbox. With a PC game, I have to check the back of the box. Well I meet the minimum system reqs, but not the recommended, how will the game run? I have an Nvidia graphics card, the game recommends a Radeon, will that be an issue? How will some of my other programs conflict with this one? I bought Starcraft II on release day, but due to a problem with my home network, it couldn't access the internet to do its authentication, meaning that I've paid good money for what amounts to a manual and a coaster. When you buy a game, you want to know that it will work. Having to spend your evening doing troubleshooting before the game will run can put a major damper on your desire to buy PC games.
3) Complexity. This goes along with "Technical Issues." When I bought my Xbox, I went into the store, said "I want an Xbox," and walked out with a fully functional game system that just needed to be plugged in. If I want a gaming computer, I or the guy I'm buying it from have to know the intimate details of each component, especially if you're not able to pay top dollar. Just look at the myriad options out there for graphics cards. Someone who's not very technically adept would be hopelessly lost trying to make a decision on what to buy.
If the PC manufacturers and game developers could figure out some of these issues, instead of making things harder on the fans, I think you'd see a Renaissance in PC gaming. The platform lends itself to better graphics and deeper/more complex gameplay than any console on the market today. But as it stands right now, the "Big Name" PC games do very well (Civ V, Starcraft II, WoW, etc) while the smaller names get more play on consoles than they ever will on PC.
TL;DR - PC gaming isn't dead, just focused. If they can fix some issues, it would get better.