Limiting factor of quality is price OP.
Do you think games are better than they were in 1995? I'd assume you would think so.
Price of a Super Nintendo game is the same as an Xbox 360 game nowadays. Gaming becoming mainstream has driven companies to be able to do so much more than they used to technology and development wise with smaller profit margins. Every studio would be bankrupt if they put the same energy and time into making games today but only sold at 1995 game volume amounts.
Market saturation is here though. Most people who want to play video games do, at least in the Western world. You won't see the same expansion of volume that occurred from 1995 to the present again unless you're counting on China or India to start buying 360 games.
[quote]Profit motive is what drives innovation in the first place.[/quote]But what motivate the buyer into purchasing the content? My guess would be the innovation. Do you think there will be a time when a game can no longer be innovating?
As for market saturation, as long as the population keeps expanding, and new gamers are born into this world, we will always see a market for video games. There may come a time when game studios and publishers will need to do business in a different manner, but video games, like books and movies will never truly die.
What motivates the person to buy is if they think it is worth what they pay. So I'd say "entertainment value" and the opportunity cost of that money is what drives that purchase. Innovation certainly can play a part in that value equation (something new or different is probably going to be interesting to a consumer).
But it isn't mutually exclusive. I'll trot out the old Call of Duty example. I don't think anyone will argue that Call of Duty is a truly innovative game from one iteration to the next, but sales are strong.
Simple answer to why is it is fun to a lot people. Will that change over time? I would think so. Even the best of things get stale after a while.