Graphics matter more or less depending on your priorities. I like games to look nice, but off the top of my head, my priorities probably go:
1: Gameplay (by which I vaguely mean controls and game design)
2: Interesting subject matter - setting/story/characters/franchise etc - no matter how well made some games are, they won't appeal to me if they don't interest me
3: Good art design - to me this is far, far more important than technical graphical quality
4: Good sound design - again, emphasis on the design more than the actual sound, I'd rather have well written music in MIDI-esque form than a mediocre piece of music performed using real instruments
5: Good technical graphical quality
6: Good sound quality
7 and onwards: Other stuff
Not to say graphics don't matter, and it was cool seeing graphical standards improve from 8 up until 64 bit (I'm not particularly into realistic games, but still kept up with PS2/PS3 etc), particularly as the gameplay changed significantly as well as the hardware/controls becamae more advanced, but for me the graphics are always a secondary consideration to gameplay. Assassins Creed is beautiful to look at, especially from a technical graphics standpoint compared to say, games on the Wii, but I find that game incredibly dull, while games like Okami look great to me because of the way it was designed.
If graphics matter to some people as much as the actual gameplay then groovy, not up to me to tell them what they like or not, and why they should like it, but it's not a standardised rule for everyone, and so it shouldn't. :P
Noticed the OP said something about games not having very impressive graphics looking low budget - great games still get made on low budgets (in fact most high-budget stuff doesn't appeal to me at all, eg Metal Gear, God of War etc).
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