There's an interesting article on Tech Central Station about innovation with regards to guitars. The major premise of the author is that

...[M]ost guitarists buying an electric guitar want to buy instruments that resemble, as closely as possible, those guitars and amps used by their heroes: Eric Clapton, Jimi Hendrix, Jimmy Page, and Pete Townshend. So radical attempts at redesigning the instrument's technology often make an initial splash, garner some press and trade show coverage, but rarely succeed long-term at being incorporated into the musical vernacular.

It seems to me that the success of amp sim modelers like Line 6 provide more evidence to this; since the actual vintage hardware is both expensive and hard to come by, people are spending lots of money to try and emulate the old sounds.

The same holds for bass as well. Anthony has told me on more than one occasional that the ideal funk bass is a 21 fret Fender P bass from 1957 (i.e. Jamerson's bass). Ampeg has been riding their halycon days of the massive SVT for decades. There has been some innovation in bass guitars, but not much. Ibanez has a bass made out of Luthite (a composite material). I owned one for a while; it was bright and loud, but not very warm, so I traded it for a bass with a more traditional wood body (and a warmer tone). Synth-Axe tried to reinvent the guitar as a MIDI controller, but failed to materialize into anything other than an odd looking curio (well, excepting Futureman).

I'm not sure what the next innovation in guitars will be; I don't think that the Gibson MaGIC will take off as anything more than a special effect. I suspect that most of the changes in guitar technology will be small and discrete (a slightly better speaker cabinet, a mildly more responsive pickup, things like that).