2)They aren't as good because they are limited. You can't upgrade a console overtime like a PC so they have to use the hardware it is base off of. Newer, better graphics cards come out every 6 months for PC, allowing their games to be better looking but the PS3/360/Wii are still limited to that hardware which you bought it with.
There are other reasons but that is the largest one.
Just judging by visual quality, something in between DX9 and DX10. Though the sdk for the consoles may provide something different.
They aren't as good or better than PCs because their hardware was developed during the time of the GeForce 7800 series (I forgot the ATi counterpart). After that time there have been massive leaps on PC hardware (think GeForce 2 series and ATi 4000 series).