It is an interesting conundrum we have presented to us with the notion of 'video games' and their level of realism. For while since the dawn of game development, games themselves have oftentimes been made to mimic reality (pong, anyone?) they have never been firmly grounded in reality. Only now with the advent of advanced video processing, physics engines, high dynamic range rendering, etc, do game developers seem almost obligated to re-create reality as closely as possible.
Similar patterns can be seen in the evolution of artwork throughout the European Renaissance. For the first time in centuries, artists found themselves needed, if only by way of commission from local nobility. Yet this enabled them to advance their art form to such an extent as to now be known as the Realism form in Western art.
Of course, as my old Western History professor stated, once you've re-created reality, what next? Well, after Realism came Impressionism, Surrealism, Abstract, and a plethora of different artistic experiments still being carried out to this day, even alongside those who choose to still work with traditional realism.
So what does this mean for video games? Will they reach the pinnacle of reality and then look down from the top of the mountain wondering where to go next? Or will they look up and find something more real than reality...