AMD's "Fusion" processor to merge CPU and GPU
 

"AMD today announced that it has completed the acquisition of graphics chip developer ATI. The company does not waste any time to make use of the acquired knowledge: In 2007, AMD will be upgrading its mobile platform and offer a Centrino-like platform as well as integrated solutions for commercial and media systems. And there will be a processor with built-in graphics."

This is quite interesting and sounds very promising, check it out.

they'd probably be weak at least at first... fitting something as big as a gaming video card into a CPU ... not practical

It may actually be genius as look at AMD's philosophy to date: They integrate controllers that were off the CPU into the cpu. look how well it turned out for the memory controller by reducing the latency. Now imagine reducing the latency and lag in video games by having the GPU on the same die at the CPU. One might expect that the GPU could be significantly less powerful than one needed if it was a separate card as the latency is brought down to almost nil. Heat becomes a real obstacle though since both cores will be on the same die. Don't be suprised if its a single chip with separate die's on the chip at first. Don't be suprised if ATI comes out with a card where the GPU integrates a memory controller or takes advantage of other AMD innovations. I think that if properly implimented the ATI/AMD merger could be the next brainchild of the PC computing age.

It also makes sense as I have read some articles stating that this is sort of the way things are going where eventually there won't be a separate GPU in PCs. Definately something interesting to watch.