It depends. God of War has a plot, it has a storyline that moves it from place to place. Would GoW have been nearly as big if there was no background and all you did was kill random gods? I don't think so.
For many people, a framework of character and plot helps significantly with immersion, with empathizing with the characters and making their motivations your own, at least for a little while. Valkyria Chronicles, for example, would have been greatly diminished as a game without its highly compelling story, even though the game-play would have remained fun.
Personally, for me, shallow characters and an absence of plot hurt a game greatly. I don't care if I ever play another Mario game, for instance. It does nothing for me, I just don't care about what I'm doing, and have no motivation to finish. I've owned three Mario games over two Nintendo consoles and haven't finished a single one.
So for me, and I think for many others, the best games combine good story and game-play to some degree. Some people shift more to the story side, some shift to the game-play side, but it's good to have both.
