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I'm not sure if i believe games will ever become photo realistic. I don't know if you guys have heard about the uncanny valley, it's a theory that has to do with robots and CGI. Basically the more realistic a robot, CGI movie or video game gets, the more positive and empathetic out emotional response will be up until a certain point, beyond that point most will be repulsed by it.

If you look at different video game characters you may notice that many of them have a few features exaggereated to give them a sort of cartoony, possibly so that the will be not real enough to fall into the uncanny valley, even in games heralded for their graphics (gears of war comes to mind.)