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I think graphics are still important. But people tend to confuse good graphics with technical wizardry like resolutions, bump mapping and HDR lightning. Those things aren't goals, but means to create a certain feeling or atmosphere.

For example, I think Metroid Prime 3 for the Wii looks better than most PS360 games. Technically it may not be on par with let's say Resistance, but it LOOKS better, because the technical "wizardry" is used better to create a certain art direction, instead of bump mapping a texture just to say "hey! look at this bump mapped texture! looks great doesn't it!"