Not only are they powerful enough, they're getting even more powerful (well, as I'm sure you guessed...).
The iPhone 4 and higher end Android phones are capable of 3D graphics performance that can look like a current-generation console (concessions are made, but clever design can make that non-obvious), and they do it at nigh-HD resolutions. In just a short couple of years, we're going to have phones that meet or beat the consoles currently attached to TVs. Certainly, more powerful consoles will be out by that time, but we're getting to the point where not as important--and it'll probably be even less important when a person can have a game on their phone and TV. There are a lot of other issues there (controls, conveniently attaching a phone to a TV, what to do with calls), but there are the beginnings for answers to those right now, and it'll be answered fairly well when it becomes a more practical possibility.