There are some subjects (war, disaster, poverty) where brutal realism and with it realistic or even exaggeratedly ugly characters can enhance the experience.
But much more often games are about heroes and the general quality of heroes is that they are better than us normal people, also physically. Them being good looking is partly logical as they need to be athletic - even a plumber can't be too obese to jump around.
And everyone likes to look at pretty things, humans included. (With obvious exceptions, like horror etc.)
Another part of this conversation is that good looking/attractive is one thing and sexy/sexual another - though much of the latter is also the first, depending taste. Sexy can be distracting or distasteful or take away credibility.
So there's a (low) limit above which attractive is better and a slightly higher after which sexiness becomes a plus.