Here's what I think:
The push towards realism isn't necessary for games to evolve but it will happen anyway because a lot of people make money off of it.
One of my favorite games of all time, NetHack, has only ASCII graphics. It is also one of the most complicated games I've ever played.
But there's something to be said for well-done graphics. Here are some games that benefitted greatly from having well-done graphics/art direction:
Turok 2
Shadow of the Colossus
Zelda: Wind Waker
Star Wars:KOTOR/Jade Empire
Seiken Densetsu 3
Half-Life
DOOM series
Castlevania 3 and 4
Metal Slug series
Monkey Island 3
At the same time, Tetris, NetHack, Zelda 2, KABOOM, Super Mario Bros., Wario Ware, and Intelligent Qube all are really fun to play without awesome graphics.
So I guess its all in what your going for. Remember that the push for realism is mostly a marketing one. The true classics will emerge above and beyond that.