That's funny, I gave similar answer when interviewing with my current company, and I got hired. Turns out it's been the best company I've ever worked for.
The question is a test for you, but the answer you give, is also a test for the employer.
What do I say? If I reach to high I endanger my own prospects at being hired. A buddy of mine answered the "see yourself in 5 years" question with "Probably working at Google". Needless to say he wasn't hired.
If I reach too low I sound like a deadbeat. If I answer with something like "Working at the position you are hiring me for" I sound like I have no vision and no drive.
There isn't a right answer to this question. Because the only right answer is "cliche".