Why can't we have both? Going for better graphics doesn't necessarily mean that gameplay is going to play second fiddle. A good developer will find the right balance between the two, but focus on what makes a game good (namely the gameplay).

When I entered this thread I was expecting to read a complaint about how games have grown increasingly cinematic with second rate storytelling becoming of greater importance than gameplay. I was not expecting a complaint about how the focus has shifted increasingly from story / characters to graphics :/

Story and character are elements of fiction, and key elements, but games as games may or may not have those.  Take Chess and Tetris for example.  Neither one has story or characters.  You end up creating your own story playing these, or they can do story about you playing either of those.  

Update,

http://www.youtube.com/watch?v=5oK8UTRgvJU&list=UUCODtTcd5M1JavPCOr_Uydg&index=93

We still get games with great gameplay from even new IPs, thanks to the 3DS & Wii U:

Kid Icarus: Uprising

Dillon's Rolling Western

Shinobi 3DS

Cave Story 3D

Star Fox 3D

Lego City Undercover (as well as the prequel this month)

ZombiU

Batman Arkham City Armored edition

Luigi's Mansion: Dark Moon

Fire Emblem: Awakening

Sakura Samurai: Art of the Sword

Super Smash Bros. Brawl

Zelda Skyward Sword

Mario Kart 7

Sonic & All-Stars Racing Transformed (thanks to Mario Kart 7 according to Sega)

Kingdom Hearts 3D

Resident Evil: Revelations 3DS

Spirit Camera: the Cursed Memoir

Harmo Knight

Rhythm Thief & the Emperor's Treasure

Ketzal's Corridors

Pushmo

Crashmo

Kersploosh!

Paper Mario: Sticker Star

Any random Mario Platformer

Tetris Axis

Nintendo Land

AR games

Golden Sun (can't wait for the new one)

Project X Zone

Code of Princess

The Wonderful 101

Rodea the Sky Soldier

Bravely Default: Flying Fairy

All these games and more are about gameplay, and at least half of them have great stories & plots.

Eh just because companies are not focusing on stories/characters doesn't mean they aren't focusing on gameplay.

I think that the huge push for online competitive modes (Call of Duty) shows that gameplay is at the forefront of some games. Online modes tend to not have stories or characters at all and just focus on pure gameplay to make a fun experience.