Exactly how did Microsoft "[steal] the rug from under" Nintendo (or even Sony)?
The Wii has still outsold both of the other consoles by a large margin: 97 million Wii/67 million 360/64 million PS3).
I don't know the game sales statistics and I imagine Nintendo loses out there but they certainly aren't weak if they have machines in more living rooms.
I think the tablets stealing the casual gamer market concept is largely overhyped. At best I suspect it's competing with the handheld market.
I'm fairly certain that all three companies have made nice profits from the gaming industry and it would be dumb for any of them to exit the market while that holds true.