I'm a lapsed gamer - for all of eight months. It was shortly after the release of Mario Kart that I encountered a lack of interest in video games. I sold the collection - four generations of consoles, $1500 of games.
Eight months later, the DS hits. I bite. And I'm back in Nintendo's Pocket.
As one of Nintendo's "Lapsed Gamers", I understand where they're coming from. In fact, if I were on the E3 floor, the very first title I'd want to try out would be Wii Sports. Not Zelda, not Mario, not Red Steel, but the stupid, graphically laboured Tennis game that looked so... joyous. I'd ascribe the same joy to games I know and love, like Katamari Damacy, or Loco Roco... or to the first Mario platformer or the Ocarina of Time.
This lapsed gamer tag they've put on me fits, and fits well. And I know that friends of mine, my family, my girlfriend, etc, will all want to play that Tennis game with me when I get it. People who gave up video games when they got their first girlfriends (don't laugh - Nintendo once characterized their target audience as being males from age 4 to the age of their first kiss. Only ten years ago or so.) I don't think Nintendo has anything to worry about this generation - I think they will really manage to connect with people like me and sell through this entire generation.
Reggie talked about how the entertainment industry - television, movies, etc - have 100% market penetration. Everyone watches or has watched TV. Everyone watches or has watched movies. And with something as simple as swinging your tennis elbow, I think Nintendo has made a brilliant move towards getting everyone to play video games. If you can get the lapsed gamers back in, new gamers will follow.