MS describes a system which is "8 times as powerful as the Xbox 360 that will include a Blu-ray drive, whole house DVR capabilites, and an upgraded Kinect v.2 with four player tracking and HD video capture"
Here is the "specs" of the 720
Here is their "plan" for the next few years.
Further in the future, Microsoft is also predicting cloud services supplanting local gaming, meaning this next generation will be the last hardware generation. In 2014 they are predicting breakthroughs in head-tracking, immersive displays and so called “ambient entertainment” using augmented reality glasses.
These are mostly rumors but some of this will most likely be true. I will edit if I find out more. What do you guys think?