The phenomenon of brief, worthless game demos is not new. Does anyone remember the demo for the game "Requiem: Avenging Angel?" It consisted of one boss fight and was all of thirty seconds long. One of Penny Arcade's early strips referenced this.
Publishers don't make demos anymore because they sell games purely on hype. The fear is that if someone plays a demo of the game and satisfies their hype-driven curiosity they will then not buy it, thus resulting in a "lost" sale. Cliffy B said as much when he explained why there would be no Gears of War 2 demo; he said that it was a game people would feel compelled to play, and that he wanted to force them to buy it to satisfy that urge.
What the fuck is that? Where is the confidence in their product? A well-done demo says the exact opposite; it says to the player, "Look, this game rocks so hard, we are going to show you everything it has to offer, because we know you won't be able to put the controller down. You will get so pumped you will kick your mom in the face!"
The last game I bought because of the demo was Bioshock. I was really on the fence about that game but the demo convinced me to get it, and I don't regret it. That demo equaled +1 sale for them. It was the full opening section of the game, with story intro and everything intact.
Before that, the last demo I can think of that convinced me to buy a game was Xenogears. Ten whole years ago. I popped the demo in with very low expectations, and several hours later I was so enthralled with the game I bought it the very next day, and it remains one of my favorite games ever since. The demo was the whole opening segments of the game, complete with the mindscrew opening video, the plot-exposition opening narration, the first town, and the first wilderness/dungeon area, where two extra characters join you from later on in the story, complete with all their special attacks, so you could check out the combat system to your heart's content. Then it all ended on a massive cliffhanger and showed a montage of scenes from the entire rest of the game. The whole thing said very effectively, "This game is so friggin' epic it is going to rock your socks off." It was a great demo for a great game, and convinced me to buy something I otherwise would have overlooked.