DR here = "diminishing returns" which implies that the cost going forward of computational hardware, algorithms, and artistic ability do not contribute much to making a real-time render any more or less realistic than what we can do now with current hardware and techniques.
it may be true, but personally I think it's bullshit as an argument against development. the diminishing returns argument is older than HDR, older than shader model 3 (let alone 4, let alone 5), and it's older than GPGPU physics; all critical technologies that are necessary for meeting the modern standard of how we approximate reality and all hilariously quaint and bygone compared to how it will be approximated 5 years from now. A big piece that's missing would be a hemispherical video device and the numerous corresponding technologies required to make that happen. eyefinity and high-res panels do not even begin to step in the right direction here (a hemisphere would ideally have an inner surface area of hundreds of megapixels if the resolution is to be convincing).
ben's point is not that we have hit a wall, but that we are in the region where returns are indeed diminishing. For instance, you can run crysis on a 7800GTX or a 5870 and it will look the same, even though the render speed will vary by orders of magnitude, nothing architecturally prohibits the 7950GT from rendering a similar or even the exact same scene as the 5870. You're still talking 5 years of GPU evolution and all the financial transactions and engineering mojo required to make it happen, but they both can run crysis. However, going from SNES to n64 (also a 5 year interval) is comparatively a much larger leap than going from dx9 hardware to dx11. There is still a return, but along similar paradigms you can see that it gradually diminishes. I view "graphics" development as a form of stepwise evolution like punctuated equilibrium. Returns diminish over the life expectancy of a paradigm, then we move into new paradigm territory, and things change for a while until the next "step." There is small evolutionary behavior within each step, when returns diminish, and dramatic evolutionary behavior between the steps, when returns do not diminish.
Diminishing returns can also be defined, not by how large or small the return is, but by how costly it is compared to past returns of equal size. For instance, a 3-teraflop GPU is not 3 times faster than a 1-teraflop GPU when it comes to rendering complex scenes, and why is that? If there is no linearization between "cost" and "benefit," then you could argue that humankind has been in a state of DR ever since we learned how to bury and water seeds and harvest wheat. DR, therefore, is our only reason to work harder; it is not a reason to stop. Indeed, there IS much, much more out there for us to learn and do, and each step we take inevitably, repeatedly and necessarily requires more people, more money, and more work to get it done than the last step. better nut up.