As a game developer, one of the benefits of working on console games is the fact that you can target a platform where the hardware never changes. For example, an Xbox 360 will always have six hardware threads. The CPU will always run at 3.2 GHz. The console will always have 512MB of memory. The GPU in consoles that ship today is not faster or slower than the GPU that shipped back in 2005. That means that Xbox 360 titles can take advantage of every last bit of horsepower on the box. If some clever technique works today, it will work in the future.
Now, as an Xbox platform team member, I find that my game developer viewpoint was a complete illusion. Game console hardware is constantly changing. It’s getting smaller, running cooler, and becoming less expensive to produce. The trick for the Xbox hardware team is maintaining the illusion, and ensuring that games that shipped in 2005 still run perfectly fine on a console built today. The team guarantees that the performance commitments made to game developers stay consistent from version to version, despite the hardware changing in significant ways.
For instance, Xbox 360 consoles sold at launch had discrete chips for the CPU and GPU. But today, those chips are merged, and the resulting CPU/GPU chip reduces the total silicon by over 50 percent, drawing 60 percent less power. Details here: http://arstechnica.com/gaming/news/2010/08/microsoft-beats-intel-amd-to-market-with-cpugpu-combo-chip.ars. The real magic is that the hardware engineers are able to make these changes while still delivering a system that performs exactly like the original.
There are times when it’s not possible (or cost prohibitive) to keep current consoles matching all the capabilities of previous consoles. For instance, the original Playstation 3 supported backward compatibility with Playstation 2. As backward compatibility became less important from a business standpoint, that feature was removed. These days, Sony doesn’t produce any version of the PS3 that supports playing PS2 games: http://us.playstation.com/support/answer/index.htm?a_id=232
So the next time someone tells you that consoles are a fixed platform, you can answer "yes, but did you know that …."