As a parent that played with legos as a kid and now has enjoyed the past 4 years buying my son legos, my answer to the question "What happened with Lego?" is: they became awesome. They managed to find a great balance between having more complex, interesting legos and still being legos. I think the modern legos are just brilliant. If you want simple, you can still get simple. If you want complex, you can get complex, but the complex pieces still feel like lego pieces and not toys with a few lego nubs on them.