Also BigChickenJim you quote, "For the record, most console games these days run at the equivalent of medium-low settings."
Where would I go to find this type of information; I am very much interested in comparisons.
I don't believe you caused extra confusion, but I will say I am confused;
could you please clarify.
Sorry, just saw this one. I'm not sure where you could go to find detailed technical comparisons between current-gen consoles and high-end gaming PCs since the hardware is so fundamentally different; my assertion is based entirely on my experience playing many games on both (I review games on the side, and that usually necessitates comparisons).
As for your confusion over bottlenecks, let's start from the beginning.
-What is a bottleneck?
A bottleneck in the computer world is situation in which one or more of your components is prevented from reaching its potential due to another component being unable to keep up. Bottlenecks rarely show up noticeably outside of gaming because gaming is one of the only mainstream computer uses that involves heavy reliance on both graphical horsepower and processing efficiency.
Example: Bottlenecks are best visualized using their namesake, a full bottle. There is a ton of liquid (performance potential) inside, but it can only flow out of the bottle at a certain rate thanks to the narrow neck (the titular "bottleneck"). That's great if you're pouring a beer, but you want your computer to behave more like a bucket. You want it to pour all of its performance potential freely when you ask it to.
-What is a CPU bottleneck specifically?
A CPU bottleneck is the situation caused by having a processor that is too slow to handle computations in a demanding environment despite having plenty of graphical horsepower behind it. In this case that demanding environment is gaming. Your graphics card could be more than capable of chugging out all the visual splendor of modern games, but if your CPU can't handle the necessary processes driving the game itself you'll start to experience frame drops and low performance (frame rates in the case of gaming). Think of it like this: you want both your processor and your graphics card to be able to produce roughly the same frame rates.
Example: Your graphics card can produce an average frame rate of 60 frames per second in a given game at high settings, but your CPU can only produce 40 frames per second in the same game at the same settings. Therefore, your frame rate will never surpass 40 frames per second on high (or really at all, depending on whether or not there are options to turn down the CPU-bound settings) in that game no matter how powerful your card is. That means that you are not able to use your card to its full potential due your CPU and thus have a "CPU bottleneck."
-How do you test for a CPU bottleneck?
As I said before, severe bottlenecks will manifest themselves even with all settings at low. However, and as Toyota pointed out, when testing for a specific problem you want to control as many variables as possible. That means that ideally you'll only want to adjust GPU-bound settings. Since you are testing for a CPU weakness, adjusting CPU-bound or even partially CPU-bound settings could throw off the test results. The idea here is that lowering graphically bound settings like anti-aliasing and resolution should raise your framerates and reduce frame drops in a balanced system. If your frame rates do not rise or stabilize under extremely light graphical settings then you know that your issue is due to something other than your GPU. In gaming, that's nearly always the CPU.
Example: I am experiencing framerates of 45 in a given game at high resolution and AA settings (and others, but we won't get into that), but feel that I should be getting better performance. I turn off AA and drastically reduce resolution knowing that these changes should produce a large frame rate increase. However, even at the new settings I experience the same frame rate of 45 frames per second. This tells me that something other than my graphics card is holding back my performance. That will more often than not be the CPU.
-How do I fix a CPU bottleneck?
You have two choices here: overclock (force it to run at higher frequencies than it was designed for) the living hell out of your existing processor or buy a new, faster CPU. The first option is great if you are on a budget, but it comes with a risk of damaging your components if you don't know what you're doing. The second option is safer, but obviously involves spending money and performing an upgrade. Which of those you choose is entirely up to you.
A computer--and especially a gaming computer--should be a finely balanced machine. No single component should hold back your other hardware; everything should be in balance with everything else. Obviously that doesn't always happen in the real world due to budget restrictions and yada yada, but you should strive to get as close to that ideal as possible.
I know that was a VERY long post, but it seemed as if you were a little confused. My explanations are a bit simpler than real life situations, but hopefully this helps clear stuff up and light the way for you a little bit.