Given that this thread has over 12 pages now, I'm sure I'm repeating what at least one or two people must have already said, but here goes.
I'm not going to lie and say that graphics aren't important at all. However, *how important* is another matter. Although I love the fact that technology is moving forward and textures, physics, etc. are better than ever, graphics are still the first impression, the exterior of the whole product.
In a perfect world, we'd have nothing but games that both looked great and played well. But since we don't, we as gamers have to decide what's most important, and I'm sorry but graphics, no matter how good they are, can only hold my attention for so long (and yes, I've played games in HD). Even if the graphics are so jaw-dropping you can't stop praising them, eventually you will get to a point where you grow accustomed to the graphics and all that matters is the gameplay.
God of War is a great example. It was gorgeous and fun to play...all 9 or so hours it took for me to finish it. After that I had no interest in the game at all, and I was ashamed that I spent $50 on it. All flash, no substance. On the other hand, I'm running through Final Fantasy 8 for the umpteenth time. Graphically, by today's standards it's kind of hard to look at (except for the FMVs which are still exceptional) but the gameplay holds up.
Are graphics unimportant? No. If things are so bad you can't tell if you're jumping towards a ledge or a flat wall texture, or if characters' faces are so nondescript they look like a botched surgery, then graphics are a problem. But that does not mean every game that gets graphics right is perfect.
And another thing. I don't totally agree that the next generation's consoles' graphics capabilities necessarily need to exceed the level of the previous generation. I don't agree because I'm still having oodles of fun with games of yesteryear. It's good graphics are improving, but gameplay isn't for the most part. That's why, right now, I'm satisfied with my Wii and I'm not in a hurry to pick up a PS3/360 (I will eventually...maybe). I've been playing games since the days of the Atari 2600. Frankly, standard gaming, as pretty as it is these days, is starting to feel a little monotonous. I'd rather see innovations in gameplay (thank you Nintendo) than improvements in visuals...though yes, I'd really love to have both at the same time, on all systems.
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