I've noticed there's lots of comments in the displacment mapping news, however no one seems to acctually know what it is, so I thought I'd just clear it all up.
I'm going to avoid going into details, so a simple way of explaining it, is that displacment mapping is like bump mapping only the object acctually ends up 3D, not simply an illusion based on lighting. In that regard, it's rather similar to a heightmap. (for those of you who don't know what a heightmap or bumpmapping is, say so and I'll explain).
However, ALL next gen systems can handle displacment mapping, infact the Unreal3.0 engine makes heavy use of displacment mapping, and that engine has already said to work fine on the PS3. Displacment mapping is a programming technique, and doesn't need any special hardware, thus it should run on all systems. However, the rev may have some special hardware optomisation, or Nintendo may have figured out a way to fix the main problem with displacment mapping.
That problem is that displacment mapping takes a large ammount of RAM, and to a certain extent processing power as well. So far, indications point to the rev not having much RAM, a problem if displacment mapping is to be used. Thus, one of the features of the rev (or more a Nintendo patent which sparked all these rumors) may simply be a way of optomising displacment mapping, allowing it to run without the large RAM usage. Infact, if one of the special features of the rev is displacment mapping, and the rev doesn't have much RAM as suspected, chances are thats exactly what the patent is.
However, as the other 2 consoles can already use proper displacment mapping simply through hardware power, this feature cannot possibly make rev games look any better then XBox360 or PS3 games, it may though allow games on the rev to be commparable to games on the other systems, which I think is all we want anyway, after all, with a completely new way to play, and full backward comp, who really cares that much about graphics?