My take on it is this:
I am 35, and have been playing since 1979 (Top Secret was actually my first RPG), and I have seen it all come and go.
I am totally convinced that the game is bigger now than it has ever been. It just doesn't seem that way because it is so institutionalized now.
For years in the early 80's, the ONLY place I could buy gaming supplies was KB Toys! They had a tiny little display with the red and blue boxes, and a smattering of AD&D stuff. Then there was another place around '83, which was a traditional hobby store (model airplanes, baslawood, etc...) that had a small row dedicated to gaming. Wow! That was HUGE. Now, there are count 'em 3 full blown FLGSs in my very small market (Utah County, Utah). The game stores in Salt Lake are awesome (Hastur Hobbies is a massive store). Over and above that, I can get a better selection of gaming stuff at BDalton, Borders, and Media Play than I EVER could in the early eighties. And there is this thing called the "internet" I understand is pretty cool for buying games mail-order. From a purely supply standpoint, the game must be much larger than in the early 80s.
Also from my perspective... I see a slight majority of current players that are basicially Gen Xers. These are the kids that played in the 80's and never left for the most part. I also see LOTS of younger middle-school, high-school, and college age kids playing in Cons, game days, etc... I am always surprised at cons at how much grey hair there is! That is cool. (Especially since my wife has yanked out 4 or 5 greys from my own head, not that I can really spare 'em).
My only worry, is that less young players are starting up than needed for replacement value, let alone growth. If there is a flaw in 3rd edition, is that it has created a massive entry barrier in expense and indimidation to new players. Let's say you are a kid (13-16) and you wake up one day and on a lark decide to "get into D&D". You march down to the FLGS to "buy D&D". I am willing to bet that 8 out of 10 kids in that situation give up after staring at a mountain of material. Where, pray tell, do you start? Without a "coach" to tell you to buy the PHB first, how the heck would you figure it out? Ok. Great. Gimme a PHB. What does it cost? $40!!! Woah. I'll be back in 9 weeks, cause that's how long it's gonna take me to save up my allowance, including tax.
WOTC needs to address this. I understand that they are, but I hope they don't blow it.
IMHO... the game is vastly larger now than it has ever been. No doubt in my mind.