Previously, Games on mobile phones were limited to graphics with low quality textures and were mostly puzzle games. They were mostly of 2D graphics like Tetris (The first game on a mobile phone was a Tetris game on the Hagenuk MT-2000 device from 1994.) and Snake (Three years later Nokia launched the very successful Snake on selected models in 1997.) and the few games that had 3D also had barely notable graphics. All of this changed when newer Smartphone platforms came out and along with them some very powerful hardware was also released.
Previously, smartphone games were only targeted at casual gamers and there was no demand to enable developers to put resources into video game production. A very important reason for this low demand was that there was no app store for the people to purchase applications. Games were mostly sold through carriers, and these carriers often priced these beyond what consumers were willing to pay.
Along with that there was no good hardware or platform to run these video games seamlessly. There was only the Symbian platform as well as Java for which games were made and even these platforms did not have proper developer tools to attract individuals to develop games for them. Thus Smartphone gaming was initially in shambles.
The turning point for Smartphone video games came when Apple released the App Store for iPhone. Now developers were able to design applications for the device independently and along with that they could collect direct revenue from their software sales. Also, they did not need to invest anything in advertising as the App Store featured their apps nicely
When Android came around the developers got even more incentive to develop games and nowadays a large portion of all Android Market submissions are video games. This trend is increasing rapidly and it is expected to remain the same way for the next few years.
There are few several important developments coming up in the mobile phone world that are bound to help the video game development for mobile phones further. An example of such development is the Xbox Live integration present in the Windows Phone 7 OS. Microsoft has even demoed a game that is playing on a Windows Phone 7 device with the same detail as an Xbox 360 and a PC.
Thus in the future we could even see high detail games on Smartphones that have the same level of detail such as those on consoles and personal computers. Along with that there may come a time in the future when Smartphone could act as portable consoles when connected to external displays over HDMI. The possibilities of Smartphone gaming are endless.(Via- http://blog.smartphoneslab.com, Naveed Hussain)