The decision to use DMPs PICA200 design was made over a year ago and testing and development have been going on for some time; its not as easy as it may seem to license a core and integrate it into an SoC and get the costs (die size), power consumption (has to run forever on small batteries), and performance (clocks and memory management) balance. So as you learn more about this device if you wonder why it took them so long, keep all that in mind.
DMP first told me about the PICA architecture in early 2005 which was their first IP core based on Ultray architecture. The president and CEO of DMP, Tatsuo Yamamoto, told me then the Ultray allows real-time photo realistic rendering with physically correct lighting and shadowing such as soft shadow casting and position dependent environmental mapping.
Ultray is unique in that it uses hardware parametric engines for certain graphics features rather than shaders. With this approach, clouds, smoke, gas and other fuzzy objects can be shaded and rendered at an interactive rate.
At Siggraph 2005 (LA) DMP revealed in more detail some of their techniques for hair, skin, and gaseous shapes. Yamamoto said then that the Ultray could boast lower power consumption due to hardware pipelines, and smaller number of polygons to achieve high-quality graphics based on pixel-level shading (Phong, BRDF, etc.) vs. vertex-level and polygon subdivision.
So the bottom line is that amazing high-end graphics functions in a low-cost handheld device with stereovision is not only possible, it has arrived. The 3DS graphics has a lot of head room to be further exploited and were expecting to be really thrilled to see and play with what Nintendo and its partners have at launch.