I don't really want photo realistic graphics in most of the game genres I play.
To me, what is most important to improve are:
- the landscape draw distance (how far you see before graphics fade)
- the quality of the animations (how well they blend, how natural they look, etc...)
- how properly smooth the polygonal material looks (how round are the shapes that are supposed to be round and the likes)
- and of course, I want a frame rate that never drops (be it either 30 or 60, as long as it's locked!)
So graphics may or may not be photo realistic. In fact, I quite enjoy the art style/direction side of a production. So to me, photo realistic or not is a non issue, as long as the stuff I mentioned are properly handled.
That being said, game like racing sim (Forza, GT5) really benefit from a photo realistic approach. And I wouldn't want these games any other way. In fact, they're really not quite there yet (they need to do a lot of extra work on the stuff that aren't the cars).