video games. They aren't just games. It's not like someone playing with a cheep deck of cards compraired to someone playing with cards that are covered in gold. The cards would look prettier but that has no effect on any of the games you play. Yet some people would like having those gold cards and would enjoy them. I'd find it a waste but that's me.
This aplies to video games as well. Some games don't need to look really pretty to be good games. Many puzzle games don't really need to much. Break out or tetris don't need to have super graphics to be good games. However some games the graphics and visuals add more to imersion. When people look more real you can relate to them more. Scary games wouldn't be that scary in 16 bits. Yes with graphics they sometimes show too much these days, but that's them just not remembering what you don't see is often more scary than what you do see.
I would have prefered better graphics on some games because it makes it easier to distinguish things. When i played little kings story it got a little anying when my people would start to look the same. So graphics can also help with clarity.
Lets not forget that the 360 and Ps3 don't just have better ghraphic capabilities. They are also ablo to collculate much more and faster. Allowing more things to go on with phisics and better AI two other things that can help a game be better.