Gears of War is a great game, and until Halo 3 arrives, that'll be the subsititute.
The PS2 dominated because of it's vast library and large selection of exclusive games. Now that the PS3 is coming around, it's not going to have that many exclusive titles, mostly because companies are avoiding the PS3. Why? Because it's so damn hard to develop with. The hardware is powerful, but so complex that programming is a bitch. Even John Carmack (the creator of the Doom series and co-founder of id Software) says that the PS3 is slightly more powerful than the Xbox 360, but it's way harder to develop with. A lot of Sony's former exclusive developers are starting to doubt that they'll last with just the PS3, which is why so many companies are doing multi-platform games. Which of course brings up the question: would you rather pay $499 for the Xbox 360 and enjoy most of the same games that the PS3 enjoys? Or would you rather pay $599 for the PS3 and enjoy graphics that are hardly noticable from the Xbox 360's?
Dumbasses? Do you know how strong of a foothold Sony has in Japan? If it wasn't for Ken Kutaragi's home country, the PS3 wouldn't have as strong as a base as it does now. Sony is a brand name in Japan, much like how Ford and the Mustang is a brand name and icon of America. When people see it, the immediately know what it is. Just like Intel; when people see their name, "microprocessors" immediately comes to their minds.
Personally, I think Sony has gotten a little bit too arrogant. Now that E3 has passed, they're feeling the heat from Nintendo and Wii. Due to the lower prices and shorter developement cycles, many developers are actually taking interest in the Wii. Ubisoft is already going nuts over it, bragging about SEVEN titles that are coming out on the Wii. While EA has stated PS3 support, it's strange to see them showcase more Wii games than PS3. What makes it even obivous that Sony is feeling the heat is the fact that many developers actually haven't come out and showcase blockbuster hits for the PS3. I'm sure everyone would feel better if developers and publishers were more vocal and would talk more in their support in the PS3. Now, it just seems like developers and publishers are sheepishly defending Sony out of loyalty rather than prasing the console as a result of true excitement.
There is possibly another reason why Sony might be in trouble this generation. It's called "media backlash." Not that the video game press is biased against Sony and the PS3, but we're starting to see something that happens in the sports world. People get sick of dynasies.
It is possible that people are starting to get sick and tired of the PS2's dominance.
However, it could be possible that the media has just portrayed Sony as an invincible gaming company ruling with an iron fist. Lets face it; no matter what Xbox or GameCube fanboy says, the PS2 was a gaming phenomenon. In the last generation's three-way console war, it absolutely smashed the Xbox and GameCube, without a doubt. In doing this, they set the expectation of the PS2's successor to very high levels. It could also be possible that the media has put the PS3's expectation levels impossibly high. There is no telling what we'll encounter this generation, but we might start to see the dynasty crumble. That is just what Nintendo and Microsoft want to see.