I hate using the blanket term "good graphics" but I'm impressed with how much the "graphics" have improved with games. The textures, meshes, level of detail, mocap + hand-rigged animations... they've been getting better and better.

But I think (hopefully I am wrong) we are at a plateau. There comes a point of diminishing returns where adding X millions of dollars into a project only adds marginal gains in eh... "graphics." I think a good example of this is MGS4... totally amazing production values and a HUGE budget but it loses a lot of the things that made the series good in the first place. (in my mind, MGS3 is the peak) It's really just a "ooh-ahh" experience.

Maybe game developers will find a new mountain to climb when it comes to user-experience. I'm still waiting for physics to blow me away.