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Its importance really depends on the game. But unless the entire experience is based around it, it's nothing but a bonus.

I don't think I have seen a single game on the 360 that I would consider a bad looking game. Games like Quake 3/ Enemy Territories didn't have excellent graphics, but they were there and they did their job good enough for you to not bother. The same can be said about games like Kameo and Halo Wars.

I did bother with Metroid Prime 3 though. One of the greatest parts of the first two Metroid Primes was their amazing visuals, and the great atmosphere that they brought to the experience. That feeling was completely gone with the third title, and the poor visuals and resolution just made me sick.