My two cents:
Digital technology is maturing. We probably won't see the huge improvements of the last five years over the next five years. Even the least expensive Rebels these days produce very high quality images in 98% of situations. New technologies are focusing on that remaining 2% (high ISO, autofocus, extended dynamic range, etc.)
As with any technology, improving that 2% is expensive and comes in very small steps. For the vast majority of photographers (both amateur and professional) they will do an informal cost-benefit analysis to determine if the modest improvements are worth the price tag. Camera manufacturers must make the same choices: is it worth X million in research and development to gain 1/2 stop ISO improvement?
The most interesting advancements, I think, are in the area of focusing/sharpening. Right now, the Lytros camera is a toy. But it may not always be so. Adobe is already experimenting with software focusing to correct out-of-focus images.
Another area I find intriguing is Fuji's experiments with hybrid digital/organic sensors. Early claims are that a hybrid APS-C sensor could outperform a conventional full frame sensor.
My view: the next big breakthroughs could very well come in totally unexpected areas.