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Because detail adds a lot to a game, GTA4 would not be as fun if the hookers were stick figures, Warhawk would not be has fun and intense if you were flying in paper airplanes shooting balls at eachother, Halo would not be hailed if it was 2D, Gran Turismo would not sell if the cars didnt look realistic, need I go on?

Simply put, games are more enjoyable and enticing when they are realistic, or rather suppose to look realistic.

Graphics also help to set games apart from eachother, do you think there would be a Call of Duty series if the graphics were that of the original Doom? Would we have a Gran Turismo 5 if the graphics were the same as the 1st?

Graphics do make games better, no matter how you try to put it.