The swimming suits are why records keep breaking, the technology just keeps getting better and it's getting people to swim faster.
Phelps utilizes the dolphin kick off his starts and turns more than some competitors, and that gives him an edge. Natalie Coughlin does the same thing. You can stay underwater dolphin kicking for freestyle and backstroke for up to 15m off your start and turns, which is a good portion of any race.
I was a competitive swimmer for a long time. I LOVE watching Olympic swimming.
But HOLY SHIT, did you see men's gymnastics!?! I can't believe we got a bronze! That Jonathan Horton was a total babe, too.

I always watch the guys on the rings, and I swear it looks like the hardest event ever. I won a physical fitness award in high school, and part of the qualification was being able to do a 7-second bar-hang or a single pull-up. I had a hell of a hard time with one pull-up. I can't imagine having the sort of upper body strength needed to do the rings. Maybe that's why they're only an event in men's gymnastics?