Regardless of whether you're talking the Playstation, PS2, or PS3 one of the core reasons why late generation games often look substantially better than mid generation games is that developers find 'tricks' to create effects that are (somewhat) similar to more advanced effects; and artists (after several years of working on similar projects) have become far more efficient with their models, animations, and textures.
I don't know for sure but I wouldn't be surprised if Crytech spent a lot of effort looking for these tricks in (pretty much) every effect they used in Crysis and implemented them in Crysis 2; and the end result is that you get similar looking graphics off of substantially lower end hardware.







