I thought about it, and while it may seem a cop out as an artist myself to say art I'm going to have to say... art.
I say are because Art is different from Life in that Art is a visual representation of how we perceive Life.
Picture, for a second, three flowers.
First is the real flower, swaying in the breeze. You're there, you experience it, you feel it, and it's beautiful.
Next is a simple photograph of the flower. No modifications, just a still image of what you saw before. In this context, it's lifeless. You don't feel it, you don't see it swaying, you don't experience it. Sure, it looks nice, but that's about it.
Lastly, you have a painting of the flower. In the painting, the artist was able to use tricks and technique to do what the photo wasn't able to reproduce, it gave perceived movement to a still object. Now, you're back to being able to experience the flower again, the use of color and positioning conveying movement and life to what would otherwise be a stationary image of a flower.
Looking at this objectively, what you see in the photo is what you saw in the field. Everything that was beautiful about it was conceptualized in your mind, you made the flower beautiful by viewing it. The painting on the other hand has all of that built in by the artist, meaning it is beautiful in it's own right without needing input from the viewer.
Another way to look at this is exaggeration. Ever notice how even with the most advanced motion capture and visual rendering technology, humans rendered in games and movies in this fashion seem... lifeless? Or ever notice how the more real and 3 Dimensional a character is at any given time makes them a less interesting character to watch then say the one with the exaggerated personality? That's because Real Life and Reality are completely different.
Stick with me here, all will be explained. First, however, read this blog post on how Spongebob is a better, more believable character visually then NPCs in Fallout 3. [http://www.gamasutra.com/blogs/AlfredMacDonald/20110529/7696/Believability_in_quotRealismquot_Why_Spongebob_OutReals_Fallout_3.php] Done? Good.
The mind is a powerful thing, it can interpret and conceptualize things that aren't really there. However, when it comes to the literal representation on a screen it looses all life. This is easily rectified by exaggeration, which in art is the literal representation and is why the uncanny valley, the gap between real life and artistic representation of life, is so lifeless and disturbing to us. What is reality to us, what we perceive is reality, is a personal exaggeration of Real Life. One of which we don't get when Real Life is presented digitally.
As for characters, humans on a daily basis show every emotion in the book (all 6 of them and every color of the rainbow they make). Culturally, however, without context or experience to guide us we wouldn't be able to tell amusement from a chuckle or worried from put off. Emotions are in the same realm of personality, like emotions personalities are complex webs that interweave and it's up to our human minds to conceptualize and put into context an individual's personality. When given a digital representation of a human we no longer can do that, so every aspect of a character's personality practically acts on it's own and the character themselves becomes a mess. The solution? Simplify the character's personality in the work itself instead, which is what we as humans would do if the characters were real.
In short, Life itself is pretty dull without our minds breathing life and meaning subconsciously into it. In our own personal reality we make Life beautiful. Art does this for us, it's reality is self-contained and thus it is beautiful in itself.