I feel that sometimes realistic graphics are what a game needs- like some simulators or horror titles going for that form in immersion. We’re not quite over the uncanny valley in AAA titles, and pushing the boundaries of real-time rendering technology can lead to improvements in efficiency of existing processes.
Other times, pushing the boundaries of realism can lead to new game mechanics. Take Counter-Strike 2 and their smoke grenades: they look more realistic and shooting through them disturbs only a portion of the cloud.