For one the console market blew up, no longer did you need to drop wads of cash for a computer to run the latest games. Broadband reached critical mass so netwo

For one the console market blew up, no longer did you need to drop wads of cash for a computer to run the latest games. Broadband reached critical mass so networking the consoles got better and with it came a number of players you could never justify at an arcade (can you imagine a 16 player shooter as an arcade game?) The arcades fought back with unique control schemes, gimmicks, and experiences that weren't easy to replicate at home, (for example Dance Dance Revolution at first). But even those experiences became replicated at home, cheaper HDTV's and Surround Sound. Pinball, in part because its charm is in actual physical interaction, was never translated as well as the other games (but the fall of pinball is an entirely different post)