It's not actually PS3 level, but close to it. Basically it's a matter of processing power and taking away polygons here and there and using the current generations shaders and lighting effects to create even sharper looking visuals. You know, the processors are getting smaller all the time.
As for the PS3 not having better graphics (in your opinion) is a matter of design. The PS3 hardware has been touted by developers as being extremely painful to code and thus, only those who have the resources and time to fully dive in there get the most out of the machine (Naughty Dog, Killzone developers, Hideo Kojima). The 360 is favored among developers for having such a simple devkit.
In the next two years we will see the next generation of consoles, as they have an approximate life cycle of 6 years.