David Hayward has a feature up, sensationally entitled Videogame Aesthetics: We're All Going to Die! He considers the pros and cons of the neverending push towards absolute reality in video game graphics (or at least the weird plastic look that people get confused with reality), and comes to the conclusion that all in all it's probably worthwhile. In the process, he takes a look at several games that employ unique visual styles that are extremely successful without attempting any sort of photorealism, including Darwinia, NPR Quake, Okami, Vib Ribbon, and many more.
Regarding photorealism: I do hope that it's achieved so that game artists are perhaps more likely to pursue alternate routes (such as in some of the games showcased in this article), but for the most part graphics that push for it no longer really excite me unless they're done well instead of gratuitously. Half-Life 2 is a good example for me. With the technology we have, there's room for an even greater breadth of styles, but that will surely come in time.