Graphics are important in what they can do. A high level of detail and a far draw distance can really help in a FPS or action game by allowing you to read signs or see hostages more clearly from further away and thus giving you more options and stratgy. Its not so much for things to look real but to give things more life. You can have a cartoony game like Jet Set Radio and do a lot with it. You could make paint acutally run together or leave that spray paint mist in the air and when you run through it your clothing gets painted up. There are lots of little things like that which you need more power to do but you don't need to make it look any better. The coming generation I believe will be more about the effects rather than things looking better.