We can speculate about a lot of stuff, but one thing is for sure, you won't see any True Global Illumination complex algorithms such as photon mapping, or radiosity next gen. "Simple" (And good) ray tracing seems already out of reach for next gen machines, so expecting caustics calculation in top of it, might be, to say the least, overkill.
On the other hand, you can achieve effects close enough to good GI, without using real GI, you just have to use a precomputed method,
precomputed radiance transfer (a.k.a PRT), using, Spherical Harmonics* lightmaps. The effect is quite satisfying, and it's quite cheap, from a calculation POV.
For instance there's a cool PRT demo for the PSP, a video of it can be found at IGN (It's called, IIRC, Harmonic City), which prove that the effect is not really hard to implement.
Also, Conker Live and Uncut, on Xbox, use also the same technique.
The only problem of this technique, some not so important (for me) lighting errors aside, is the size of those precomputed SHLM.
(*I know some developers here who will cringe when they'll read this word)
Guden Oden said:
How about we tesselate our geometry really fine (2-3 pixels/poly max) and then calculate lightiing only on a per-vertex basis and then fake it with goraud shading instead.
I would really like to see a game like that. Nevermind per-pixel global illumination or any other buzz-word-of-the-day, just a smooth-meshed world with smooth lighting. That'd be great.
What you're describing is almost another of thoses buzz-words-of-the-day, it's REYES.