Do you think it is likely Sony will eventually release a sequel to their current generation of video game systems, or do you think they'll just throw in the towel and abandon video games entirely?
I personally think they won't give up very easily. The problem is, though, their "graphics is king" strategy has raised the bar too high for their future systems. Nintendo's next generation console would probably sell very well against the PS4, even if it only equaled Xbox360 or PS3 graphics. What can Sony and Microsoft do? They can't release the next generation of consoles without beefing up graphics higher than their current systems, so it is like they aren't really in the same market as Nintendo.
What will the PS4 be like if it ever came out? I guess that depends on how soon it comes out. If it is 10 years from now, as Sony assures us will be the lifetime of the PS3, then it could feature some very advanced technology having to do with Virtual Reality headsets and such. Who can really predict that far ahead? But it is obvious Nintendo and Microsoft won't be idle in that time either, and Nintendo will probably have lots of ideas up their sleeves which Sony will try to steal. But if the PS4 comes much sooner; in like 5 years or so, which I think it will, then it probably will be more like the PS3, but they will of course make it smaller and cheaper, and you can be sure it will have a motion sensitive controller similar to the Wii. I think the graphics won't improve that much over this generation, though. I think we are nearing the point where graphics are getting so close to real life that there isn't much to improve on.
Hardware is already at or near the point where the experience can only be enhanced by peripherals. Nintendo has already grasped this. I think Sony and Microsoft are starting to, but can they catch Nintendo's momentum?
I think the PSP line is going to be a larger conundrum for Sony. The handheld market is very different than the console one. Graphics are even less important on a handheld than they are on a console, and the PSP is very ill suited for this market. The optical media Sony chose for this device is very slow to load and is devastating for battery life. So I think if there ever is a PSP2 they are probably going to drop the UMD format and have it be card based like the DS, Well, I mean, that is if they were smart. But knowing Sony, I wouldn't be surprised if they introduce a mini blu-ray format for it.

But even resolving that, they'd lose backwards compatibility with the last generation of the PSP, and this will put them at a serious disadvantage to Nintendo who will almost surely maintain backwards compatibility which has worked out well for them in the handheld market since the beginning.
So Sony faces the dilemma of keeping optical media and have the issues of long load time and low battery life associated with it, OR they abandon that and try card based media and completely lose backwards compatiblity, and alienate their current customers. Although, considering the very small number of exclusive hits the PSP has at the moment, losing backwards compatibility in the PSP2 probably doesn't matter much. So I am thinking if the continue in the handheld market their next device will drop the PSP name and have something completely new. That name is soiled and can never be respected again EVER. Whatever this device will be will probably feature a touchscreen and steal whatever else Nintendo is doing, because that's what Sony does best.
Perhaps I am wrong and there won't even be a PS4 or PSP2. I'm not a Sony fan so I really wouldn't mind if they gave up with video games, but I don't think they will. These are just my speculations. What are yours?