Cut scenes used to be separate videos, but these days they are mostly just rendered in realtime with the game engine. There isn't any particular reason to not put a high quality movie on the disk (apart possibly from the size), but the modern theory is that having a consistent look is important for immersion, so the game engine graphics are preferred.
As to whether cut scenes as a thing are dying: we are in the age of "not restricted by technology", so it's kind of up to the game designers if they want to include them.