Interesting, hadn't ever thought of it like that. And now that I do, there hasn't even been a real "wow" innovation in phones in the last few years either.
The trouble is you are forgetting how rapidly the world of technology is accellerating.
It took twenty years for an emulator of an NES to run on a mobile phone (Symbian S60, I believe had the first "workable" one... ahh that chubby little Nokia 6600 =)).
Now every year the CPU/GPU is "2X, 3X, 4X" faster than the one before it.
Shouldn't that mean we'd have at LEAST PS3/XBOX360 quality in our phones? Nope. We are still severely limited by three things:
HEAT, Space, and Power Consumption
The power of these devices is incredible, but when you start getting into processing power that outputs the equivalent heat of a George Foreman grille, it becomes impossible to disperse it in such a small package.
Then, notice the power ratings on the back of your PS3? How about that massive brick of a power supply on the 360? Ya... 3.7V at 1A or less just aint gonna cut it.
Finally space. If we had the full 8GB version we could surely have a lot more detail. We don't. They crammed it into less than 2GB.
It's an astonishing acheivement, and even though I'll probably only spend 30 minutes playing it, I bought it just to encourage them to KEEP DEVELOPING.
Most importantly: NO MORE IN APP PURCHASES!!! I WILL PAY $50 for a "mobile" game if it's that good and if it has NO IAP!!!