It seems that most new games even ones using DirectX11 or OpenGL4 don't really employ tessellation much and the ones that do,use it in the wrong places.In some games they use it on flat objects that...well,remain flat even after they tessellate them.In fact they just tessellate things without applying displacement to them??But they don't use it to add a lot of detail to characters or stuff like that.The only game that I think makes good use of it is Alien vs. Predator.The alien looks amazing with all the tessellated spines and grooves on it's back and tail.So why do most developers stay away from it?It looks really simple to implement,especially by a well funded team that makes AAA games.Is it too heavy?What about tessellating only edges with some edge detection algorithm?

It isn't completely straightforward to implement if you have to account for "non-standard" meshes - e.g. non-quads, too many adjacent faces/edges, etc. (then you need a lot of pre-computation). Otherwise from that, I don't understand its absence either but Ashaman has a point. Unfortunately :-(

when the 720/PS4 come out with D11 capabilities, you will see a boom in it's use.

I hope it will be at least D12 ;)
To the question- i think currently developers are used to parallax/normal mapping pipeline that in some way simulate tessellation,
also when you turn it on changes aren't so breath-taking. (mainly because currently it's just for having cool statement on the box)
currently you can see real potential only in some tech demos...

I hope it will be at least D12 ;)

wouldn't releasing D12 and D12 cards somehow damage the market?It'll just split the customers into even more groups.

Right now, there's not much incentive to spend money developing tessellation tech (and as mentioned above, it's not just as simple as just turning it on; it has a big impact on your art pipeline) -- but as more PC users upgrade to D11 cards, and when the 720/PS4 come out with D11 capabilities, you will see a boom in it's use.

Yep, you're going to see a big jump starting late next year in minimum system requirements for the average game. I expect it won't be totally dramatic, the install base for the PS3/360 is still HUGE, it may take quite a while for games to totally dry up for those platforms.

Regardless, it will be interesting to see how developers try to adapt. Tessellation is a clear win in many, many cases. But that's once you get over the hump of actually implementing it from engine to content pipeline. Heck, same goes for virtualized texturing. It's a fantastic win for almost all cases, but it's such a large initial investment programming wise that it's still used rarely.

Going off on this inane tangent, I'd like to predict that many more companies will be using some sort of licensed engine/central technology group with the coming generation. It's not content pipelines that are going to be impacted as much by far more powerful hardware as it is engine programming. Artists already have ultra high poly/high res models sitting in Z-Brush and etc. Heck some already complain when their beautiful work is squashed down into mud. But with increasing power comes the drive to make the most of it in ever more complex ways (at least in realtime). And that's going to take ever more complex programming, and studios not known for such are already having a hard time with that.

One reason could be, that the industry still makes games primary for Xbox360 and PS3.

Others have commented but I'll throw in my voice to this too.

While the internals of the renderer on our shiney new engine are designed/arranged in a D3D11 fashion it was only November of last year that we were given permission by management to drop/rip out the Windows DX9 path and only support DX11 (+feature levels), X360 and PS3 paths for the game we are working primarily with.

Even then however we don't have any support in place for compute shaders, tesselation, geo-shaders or any other 'post-DX9 hardware functionality' (cbuffers etc are of course used internally but that's an implementation detail and nothing more).

Post-game release we do have plans to add these things, as the game teams require it, but right now it's basically DX9 features on the DX11 API (not that the game supports DX9 hardware, but, ya know, details ;))

(side note: I had, however, considered hacking in PN Triangle/Phong triangle support for a few materials, unfortunately workloads haven't allowed it as yet and I'm not sure management would like me sneaking it in via a hidden command line option anyway ;))

wouldn't releasing D12 and D12 cards somehow damage the market?It'll just split the customers into even more groups.

it depends... but when you think about it, consoles should be more capable than pc, xbox360 had first unified shaders,also graphic specs are little more than dx9 i think. When they release consoles in one year with "old hardware" (dx11 is quite old already), it will cause that developers will move to dx11 (hopefully on pc also) and STICK there till next console is done in 5 years. So when dx12 will come out, developers will stay on dx11 (because of consoles). New consoles shall lead graphics,not use current gen pc possibilities.