Neal Robison, the director of ISV relationships at AMD, claims that the next version of Xbox will be capable of the level of graphical detail seen in James Cameron's movie Avatar. Even on PC, that kind of technology just isn't here yet, but AMD claims the Xbox 720 will launch with it.
In addition to high level of graphics, Robison also mentioned that the next generation of consoles will allow for higher degrees of game AI. For example, the article states that the hardware "will allow for every pedestrian in a game such as Grand Theft Auto or Saints Row to have a totally individual mentality, meaning when you shoot a gun or run someone over they don't all just do the same thing."
There will be no more mob mentality, where everyone just screams and runs away; every NPC will actually be an individual character.
It's important to point out that Microsoft has yet to announce any plans for a successor to the Xbox 360 and it may not do so for some time. In addition, AMD is not confirmed to be providing the graphics chips for the next console.