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Its like asking when paintings are going to look more realistic. Realism isn't the point of games.
Don't forget the uncanny valley.
Once you get to near-photo realism things get "creepy."
Depends on what game, but in most game, the basic idea is to create a fictional world that the player could immerse themself in. You want to feel like you are actually there in this virtual world. Graphic fidelity is an important factor that enable this. For example, GTA is a fictional copy of our real world where you can be a thug. The more closely this fictional world resembles the real world visually, the more immersive the experience would be because the player will feel like they are in a real world (except that they can do things here that they cannot in real life), rather than a pixelated cartoon movie.
Looking ahead, how long do you think it will be before real-time computer graphics are 100% realistic like a movie?
TS: There are two parts to the graphical problem. Number one, there are all those problems that are just a matter of brute force computing power: so completely realistic lighting with real-time radiosity, perfectly anti-aliased graphics, and movie-quality static scenes and motion.
We're only about a factor of a thousand off from achieving all that in real-time without sacrifices. So we'll certainly see that happen in our lifetimes; it's just a result of Moore's Law. Probably 10-15 years for that stuff, which isn't far at all. Which is scary -- we'll be able to saturate our visual systems with realistic graphics at that point.
But there's another problem in graphics that's not as easily solvable. It's anything that requires simulating human intelligence or behavior: animation, character movement, interaction with characters, and conversations with characters. They're really cheesy in games now.
A state-of-the-art game like the latest Half-Life expansion from Valve, Gears of War, or Bungie's stuff is extraordinarily unrealistic compared to a human actor in a human movie, just because of the really fine nuances of human behavior.
We simulate character facial animation using tens of bones and facial controls, but in the body, you have thousands. It turns out we've evolved to recognize those things with extraordinary detail, so we're far short of being able to simulate that.
And unfortunately, all of that's not just a matter of computational power, because if we had infinitely fast computers now, we still wouldn't be able to solve that, because we just don't have the algorithms; we don't know how the brain works or how to simulate it.
As was stated previously, there may be an 'uncanny valley' effect going on. I find games from the late 90s like Thief and Half Life to be very immersive. I notice everything that doesnt look quite right in newer games like Crysis. I'd rather see developers focus on good gameplay rather than endlessly chasing 'realistic' graphics.
As video processing gets more and more powerful, and graphics get more an more realistic, our eyes become more and more attuned to the small details that are missing. Professional artists can spot a 3D render from a photo instantly if asked to, and video games are all about taking shortcuts and smoke and mirrors, so the trained eye can pick out those missing details even easier. We will never reach that threshold, yet we have reached it many times. Suspension of disbelief is the act of making our brains perceive what we see as 'real', even when the visuals are nowhere near real. When I played Turok on N64, I thought I was looking at something real, my memories of the game are photorealistic, nostalgia forces me to remember what my brain perceived, not what my eyes saw. Quake 2, UT2003, Far Cry, Doom 3, Crysis... All of these games had that effect on their players.
Yet all these games are obsolete, with bad graphical fidelity by today's standards.