My opinion is that the problem with innovation in gaming has been the whole trend for producing triple-A titles all the time. Not only are these titles very risky due to production costs, but, developers all seem to be just playing "follow-the-gimmick" in a desperate to scrape dollars by copying another game that was successful( the "like X but..." design). While this sounds like a reasonable strategy, the problem is that an imitator can never be as good as the original. Why buy a, at best, second-rate imitator when you can just buy the original. In the end, you end up with too many deer all desperately pushing to get a single lap of hydration from the same fist-sized, drying puddle on the ground. Every time a game or design strategy garners any success, there is a mad rush to recreate that success, but the imitation seems to always be done without understand what actually makes the game work properly in the context that it does.
Back in the olden days of gaming, many games had very different styles, feels, and control schemes. One could actually tell who developed a game just by looking at it. Nowadays, every game is just a copy of each other, graphically, contextually, and idiosyncratically. Without the publisher/developer stamp on the box, you wouldn't have a clue who made the game. Some of that may be due to the use of third-party engines, but I think a lot of it is more of the "follow-the-gimmick to the water-hole" style thinking that seems to permeate the game industry.
As for motion controls(damn, Yahtzee, get off the flipping couch, man) the problem that I see there is developers are not using motion controls as a new paradigm of interaction with games. Instead, they are using motion controls as just a simple 1-to-1 mapping to the same ol' button scheme we have always used for decades. I could imagine a motion control game as being used for purposes of physical therapy, learning martial arts, improving performance in sports, or other real-life actions; naturally, there are likely even more possibilities beyond these, but they are not being explored because developers/publishers are just linearly thinking along the same train-tracks they have always followed. The Kinect probably has the most potential to accomplish something new in the paradigm of motion control, however, developers and publishers, in typical "follow-the-gimmick", "like X but..." style thinking simply imitate what they see on the Wii rather than think in terms of the actual paradigm of interaction that the Kinect represents.
To be honest, I have to question whether gaming really has ever been all that innovative in the first place. Over the years, there have been a lot of games that really just do the same thing that has always been done. There really doesn't seem to be much that really tries to push new ideas, new concepts, new paradigms of interaction. We don't seem to hear much about or have much large scale exposure to games that really try to break the mold of what a game can do or be. We really don't try that hard to venture outside our comfort zones, and when we get a game that actually does push outside the comfort zone, there is often a lot of push against it. We end up not liking it because it's not enough like the same games we've always played. In essence, the gamers are just as much responsible for the lack of innovation because we seldom tolerate any true innovation when it happens. We'll often criticize the game for not being enough like whatever is the current popular set of 5-6 main-stream triple-A games.
Making matters worse are the "hardcore" vs. "casual", PC vs. consoles holy wars that have raged in the gaming community. These wars really amount to a set of opinions that do not tolerate gaming deviating from a prescribed formula dictated by a select few in the community. This only serves to further restrict innovation in games to being just the same stuff as always.
Further compounding the problem is the gaming press. The gaming press does not seem too willing to give exposure to the games that really do push the envelop. There might be a single snippet-sized article mentioning it in passing, more like a footnote in the overall news stream, but it will receive none of the copious regurgitation that the main-stream, same-old-thing-as-always triple-A titles are given. For instance, think of how much attention Ico gets now that it has become such a cult favorite in the gaming community. When the game was first released, you barely knew it even existed. Only now, when we are screaming for something new and different, do we finally realize how great a gem we had back then. And this trend continues even now. Even crappy triple-A titles are given much hype and pre-release press, pages and pages of first impressions, beta impressions, preview imagery, and analysis spanning weeks, sometimes months, much of it really just being the same thing said repeatedly. However, that Ico-like gem just gets a half-page article or footnote maybe once in that same span of time. Basically, the gaming press just misses out on the real innovation that is going on because it's too focused on the big shiny triple-A games that are nothing but the same recycled crap.
Basically, gaming innovation is stagnant because the people in gaming are stagnant and closed-minded. They aren't willing to venture outside their basic comfort zones, and once they find one cool or funny thing, they simply repeat it ad nauseum in any and every possible context.
Gaming is capable of a lot, but until we go pass thinking and designing games as just amusement-park thrill rides, gaming will never achieve that level of maturity and social significance many of us wish to see.
(I wrote this in stream-of-consciousness, so I don't guarantee all the logic is sound everywhere.)
I suppose I should have said that there were two types of people, people who prefer physical stimulation and people who prefer mental stimulation.
