There is a simple answer to this. It is all relative!
If you put any of our current champs in UFC 1, the results would be catastrophic – each and everyone of them, from BJ to Brock would absolutely demolish the old competition.
Royce Gracie didn’t get old and fall out of his ‘prime’, the sport just outgrew him – and he didn’t evolve at the same rate.
It is actually hard to appreciate how good fighters are – because we have nothing to reference it to, besides other good fighters. Unless we could jump into the cage, and go 5 minutes with someone like Elvis Sinsonic – who by our standards is a piece of crap – BUT he would still kick your arse so badly you would be pissing out your belly button.
So in conclusion: Yes fighters will get better, but it will be a subtle change over time, and we won’t notice that much. And, as most people do, just think when ex good fighters start losing, it is because they are old and out of their 'prime' and not because the sport, simply, outgrew them.