It is interesting to look at the history, where the original "flame wars" were Arcade vs private gaming. Pong was an arcade game, and then it was a thing you could plug into your TV, arcade machines (the 'consoles' of their time) got better, and personal computers got better (they fed off the same technology eco-system after all). Then 'consoles' which were nearly as good as the Arcade machines but not as good as full blown computers, but they were cheaper than full blown computers. And then the C64/Atari campaign where they could be "a console AND a computer" and then the Amiga which was better than Consoles of the day and a computer, which inspired other computers (PCs mostly but some Macs) to get better, which nearly wiped out Console sales, until Sony dropped the PlayStation on the scene which was as good as a much more expensive PC, and then Sega and Nintendo fought back and upped their 'console' game with the Jaquar and the Game Cube, except 3Dfx has just put out a really cost effective 3D accelerator card and now PCs jumped ahead fast, and Consoles needed to sell for a long time to make up their costs (money was made on software not hardware) so the rapid evolution of 3D hardware gave PCs an edge as people swapped out video cards and then motherboards with faster and still faster video 'slots', and now the consoles were way behind, except they could still be cheaper than the high end PCs, and now a lot of the performance changes relative to games has flattened and ever since the Xbox where Microsoft showed you could essentially repackage a PC as a console, well the differences have become shallower and shallower.
Thanks for the summary, my video game knowledge doesn't go back that far, haha. I agree though that the differences between consoles and PC's are starting to blur. For that reason I'm rooting for SteamOS. I think it won't be an easy transition, because gamers are so entrenched in their ecosystems, but I would love to see the strengths of both platforms together and do away with some of the old principles the gaming world is holding onto.