"Do the capabilities of today's tools and the expectations of today's users change the need for prototyping?"
The reason I ask is because it isn't as easy to test interaction design patterns on paper if they require visual transitions, sounds, tactile responsiveness (on touch screens), vibration (think Nintendo Wii).
I have seen numerous times that communicating complex interactions to developers with paper mockups, or even digital mockups, is far more difficult than showing a prototype that actually does what is required.
I have also heard first hand from developers that say a prototype really helped them with the details. Not only does it display how the software should behave, it provides and idea of how it might be implemented. This might be unique to the fact that the prototype built with Flex was for an application that was also built in Flex. So there was the ability for direct reuse of custom components, etc.
What do you think. Is there value? Can it work in an Agile environment? Or is it still as unnecessary as it was ten years ago?