Just to add a possible parameter to the discussion; are we perhaps not grouping art direction/style and graphic fidelity as one entity? What exactly do we deem a good looking game?
Games like Fez, Bastion, Bit.Trip Presents Runner2: Future Legend of Rhythm Alien, Sonic Generations, even Dust: An Elysian Tail come to mind ;all beautiful games without being tech demos by any stretch of the term.
Personally, I couldn't be fussed about groundbreaking graphics or the like since I place more value on gameplay and story (unless we're talking MP), although I don't necessarily think it's far-fetched to expect a good looking game. I just think the gaming community needs to rethink how they define a good looking game.
Personally, if a game is fun, has a story that grips me (if it's a Single Player game), and presents a good art style whether it's 16bit pixel-art and the like, 2D animated, or even realistic 3D graphics or whatever aesthetic style you go for (which is subjective, I guess), then I'm a happy gamer.
In terms of how a game looks, I just think developers should make the most of their chosen art style, for example Far Cry 3 is no Crysis 3 or Battlefield 3 in terms of graphic fidelity or pushing graphical boundaries, yet it's a more beautiful game IMO. I'm sure gaming history has similar examples where better a good art style looks or feels better than "tech demo" level graphics in terms of immersion.
That brings up another question; what is a good looking game to you? My own answer to that question is a lot more open and flexible than the average answer.
Somewhere, lost in all that rambling, is a point I'm making


