Remember when a castle was a big block with smaller blocks on top of it? Dragons were blocky creatures that looked more like ducks than anything else, and you were a simple square holding a horizontally-facing arrow by its point. Remember Adventure for the Atari VCS? That game was so far removed from anything approaching realism that it was very nearly an exercise in imagination just to play it. Yet that made it no less engaging or fun. Sure, one could argue that if we'd had the choice between the rudimentary graphics of the time and something more like, let's say, Dragon's Age, players would naturally flock to the latter. That seems to be a given, as long as the gameplay is identical. But that's never the case; no one will ever release two versions of a game; one featuring amazing graphics and the other displaying dumbed-down visuals.
It's natural to want things to look as good as they possibly can. As consoles become more and more sophisticated, and PCs continue their constant upgrading dance, we're going to see greater fidelity in the kinds of environments, rendering, and animation we can produce. I just tend to take issue with people who argue that all of this graphical prowess results in better games.