Discrete graphics are expensive, noisy, hot, and suck up tons of power. Upgrading your graphics card used to make a huge impact, but each successive generation now yields less and less improvement. (Carmack himself said in the most recent keynote that there probably won't be any "wow!" moments from graphics upgrades ever again.) Furthermore, some of the best looking games of the past few years (Super Mario Galaxy) were designed to run on one of the weakest systems around. As fun as it is to flip every switch in Crysis or Metro, I don't think most gamers care that much about diffuse lighting and ambient occlusion. We're at the point where things really do look "good enough" for all but the nitpicky, and I say this as a PC gamer for 20 years.

You're definitely the only person I've ever heard describe Super Mario Galaxy as one of the best looking games of the past few years. I looked at some screenshots and I have no idea what you're talking about.

While there may not necessarily be more features like ambient occlusion on the horizon, increased raw processing power and memory are going to lead to higher fidelity scenes at higher resolution. You're going to have orders of magnitude more detailed props on screen, and there are going to be orders of magnitude more of them. You're going to have more animation and more flexibility. You're going to have tons more lighting and particle effects acting on those multitudes of more detailed props, and you're going to be doing all of this at 4K.

I don't know when the last time you upgraded your graphics was, but I just went from a pair of GTS250s to a GTX770, and I've had my fair share of holy shit moments looking at games like Crysis and Metro.

Saying that graphics isn't going anywhere is the same as saying 640k ought to be good enough for anybody. It's incredibly nearsighted to assume that progress is just going to stop because things are "good enough," especially in the technology field.