To add my two cents:
PC gaming isn't dying, we're just going through a phase. These things happen. I remember back 4 years ago when I was buying my current PC how everyone was talking about whether it was the end of console gaming. At that time, PC games looked and played better and had more variety than their console cousins. Now, things are the other way around. Well, not quite. The PC technology has caught up to the consoles, though at this point it's a bit expensive. Give it another year or two and PC technology will be overtaking the consoles again, and we'll be talking about console gaming dying again.
Now, this isn't to say that PC gaming doesn't have it's issues. Piracy is certainly a problem, however, I don't think it's as significant a problem as the other issues affecting PC gaming. Namely, the hardware issue.
Right now, I have a Dell 8400 that I bought back in September '04 that cost me $3000 + $500 for the X800XL vid card I bought for it in March '05. In August of '05, my friend bought a custom build computer that only cost him $2000 + $200 for the surround headphones he later bought with it (my system already has surround sound blaster and speakers). He paid roughly $1300 less than me and his PC pretty much outclasses mine.
(And before anyone says "prices drop", yes they do, but he didn't buy the same parts I did, he bought SUPERIOR parts. Had he bought the exact same parts I did, he probably would have paid half of what he did for his system).
But this isn't the biggest issue. The biggest issue is that not only did he pay less for a superior product he is able to upgrade his PC very easily, something that isn't feasible with my Dell since Dell does not manufacture either the PSUs or their motherboards to retail specifications, making inexpensive periodic upgrades unfeasible. Obviously, the plan here is to lock the customer into a system whereby the only way to upgrade is to buy a whole new computer, which in my case is completely unnecessary. My 3.4 GHz Pentium 4 with 1GB of RAM, while starting to look old, isn't so old that it needs replacement - it's more than capable of meeting the minimum system requirements of most games out there today. My X800XL video card, however, is near obsolete given it's lack of Shader Model 3.0 support. To make a long story short, I'm a student on a tight budget and while I COULD make the upgrade to a new vid card had I a custom built PC, it's economically and practically unfeasible to do so with the Dell; the cost to upgrade the Dell with a simple vid card would require additional costs that would nearly cost as much as getting a whole new custom built base system.
The point is: how many PC users out there own a brand-name manufactured PC that is near impossible to upgrade? A lot, I would imagine. So is it any wonder that sales of many PC games aren't so good? I mean, I cannot play BioShock or Mass Effect on my PC. And while not everyone is in the same economic boat I am in, I'm sure most brand-name PC owners resent the idea of spending large amounts of money buying a WHOLE new brand-name PC every 2-3 years, especially when MOST of the parts from the old PC don't need upgrading.
This segues into my other point: PC gaming is inherently for hobbyists / enthusiasts and not for the average user. If you're anal like me and enjoy having a lot of control and customizability over your computer, than PCs are great for you. But if you're like the vast, vast, vast majority of people out there who either a) don't understand computers, and / or

hate managing their computer and would rather just push the "on" button and have it work perfectly all the time, PCs really are not for you; you'd likely be happier with a Mac and a 360 / PS3 / Wii. The thing about consoles is that all you really need to do is plug them in, insert the game disc, and press play and you're done. No worrying about drivers or hardware or anything of the sort. So obviously, when given the choice, MOST people out there would choose a simple computer and a console over a complex, complicated PC.
Which leads to my final point: back in the day, video games were perceived by many people to be for children. Today, however, those children have grown up and represent a very, very large portion of the population. Is it any wonder that the age of the average gamer is in the late 20s? The point is, video games are no longer the pervue of fat, pimple-faced, socially maladapted teenagers; video games are practically mainstream now. However, as I pointed out earlier, most people, despite growing up with PCs, are still computer illiterate and would rather just plug it in and press "on" than have to worry about all the little things that can go wrong with PCs.
And so what you've got is a recipe for a system where console games will always outsell PC games (some RARE exceptions apply, of course).
Mad Cat