A friend of mine has switched to Elementary OS and claims it's the best Linux desktop he's ever used. Debian / Ubuntu based but with a lot more focus on the user interface and making it both pretty and useful. http://elementaryos.org/
Is it time for Canonical to lose the Desktop Linux battle? Perhaps, as they seem to be diverging more and more from what the average Linux user want's to see. Unfortunately they seem to have missed that no matter how much you try to dumb down Linux for my Grandmother, 99% of Linux users are still going to be geeks, or have an install that is set up by a geek.
Maybe with Valve moving more towards Linux with SteamOS and porting their game platforms to Linux, and with Electronic Arts and Dice occasionally wanting to mention the word Linux so they don't feel left out, you'll see more mainstream adoption. I imagine we will go through something similar to Android - different vendors may try to push their own "versions" of Linux branded for them, just like Valve is doing with SteamOS.