I don't think IOS will kill off console gaming, but it will seriously hurt the profits of PS3 and XBOX 360. If it hasn't already. IMO, IOS does not have to try and match the graphics and processing power of consoles to bite into their profits. They just have to offer an enjoyable experience. Look how good the Wii did, during the early years, against PS3 and XBOX 360. The performance of the Wii didn't come close to the other two, but it still outsold them. The Wii offered the fun factor that the majority of casual gamers enjoyed. This is what IOS does, it offers a fun gaming experience, which is mobile. This fun factor and mobility will and does appeal to a lot of people.
Since I have had my iPhone, I haven't touched my PS3 for gaming. I used to be a hard core gamer, but now I just like to play casually, and wherever I fee like it. I am not confined to my games room to play games. Now that I have an iPad, I am really enjoying that device for gaming.