What made arcades great was the social comraderie.
Joining up with a buddy in NBA Jam and talking absolute smack to any and all chumps that dared challenge you (regardless of your talent). Knocking off a line of Street Fighter II contenders in a smashing winning streak. Watching and learning as someone deftly maneuvers through a wave of bullets in Raiden and cheering them on.
The industry seems to think that arcades died out because consoles began to equal or outmatch the graphics of their arcade counterparts, but that's not what really happened. Arcades died out because people stopped going to them. Now I know that kind of sounds like silly circular reasoning, but hear me out. You went because that's where your friends were at and it gave you something to do together that was fun. There was kind of a breaking point when there just weren't enough people to there to warrant going, so everyone collectively stopped and arcades died.
The industry's response was to introduce a bunch of arcade machines that gave you experiences your home consoles could not. In other words, arcade machines added on a bunch of gimmicky peripheral crap that allowed you to pretend you were skiing, riding a wave runner, pedaling a bicycle, or riding on a skateboard. The trouble was, the majority of these games were just curiosities. They didn't add to the social nature of arcade gaming. In fact, they took away from it. There's no way you can play a game like Final Furlong, the horse racing simulator, and not be mercilessly (and justifiably) ridiculed by your peers. You just can't.
If arcades want to come back now, they need to provide a social experience that is enhanced by face-to-face interaction that wouldn't be replicable online. You need to be able to brag, high five, talk smack, watch and learn, etc. They also need game developers willing to create arcade exclusive titles, like the new Canabalt 2 player. That's the kind of stuff that would get me back out into the arcades again, and I think it's why most of us miss them.