Yeah, especially with all the shaders that are going to be used in games now. Any material in the end should be able to be recreated completley realistically, and that will lead to realism.
All they then need to sort out are the advanced visual effects, though we have most of them. Stuff like haze, etc will add alot to the realism.
Then theres the models in games which are also getting complex. In the next year or two, I imagine texture sizes will become so big that you won't be able to tell that a texture is being repeated, and will look so life like and crisp, they'll be no more advancements in that area.
Then with Direct X 10 coming along, you won't have any uncurved surfaces, and so a wheel on a car will be completly round with no octagon effect (what I call it)
I'm sure were only a few steps away from this.
Then of course, cards will get faster at rendering the game for more FPS in ever higher resoloutions, which may even bring in another form of HD.
SHD - Super High Definition maybe?
Then all that needs to be worked on is the physics engine, and game engine to make the game playable. This needs alot of work in new games, as even with cinematic visuals. The in game view we have in games now doesn't cut it.
Some how, we need added camera views, but still allow it to be played while playing, smoothly, and without a hitch. Something we can't yet do with games.
I know Resident Evil has this kind of effect, but I'm talking about something more ground breaking than that. Something that will revoloutionise game engines as we know it.
Maybe we'll end up with one game engine capable of all the above that every company will use and update slightly at will? So updates will become available, and there won't be loads of game engines anymore. Just one universal one capable of ANYTHING.