Photo realism, isn't realistic, as it is. It will take hoofing power to bring true realism to us, with the help of vr. I'm fully aware Oculus and alike are going to be brilliantly utilised for many other things than gaming. The windows desktop, maps, film, tours, teaching etc. Yet, as for gaming, it will be able to rip us out from the 21 year hole we've been in. A.I will be developed for this due to games not being the same as before, in many ways. It'll be more than just shooters that'll change. We're talking almost like the film, Strange Days (james Cameron wrote it) and it's urges and fixes. An emersion that will involve major rewriting of how we use A.I and how we see it.
If Oculus is to be the price they claim upon release, it'll be the price of an reasonable 1080p ips monitor, and as far as other hardware goes, like 4k monitors and cards to compliment them, or a good racing wheel etc, Oculus is setting up to be a better and cheaper buy than most other hardware you'd be investing in.
I agree A.I should be more intelligent, yet I do think graphics and how their used is as important and both need to progress to inspire and compliment the other. I also think simulation is becoming increasingly popular as things look better and feel more real. People want to know what it's like to jump off a cliff, drive or fly, run away from the Terminator, chat up a stunner, play Al Pacino in the shadows of a nightclub, command the galactic empire, virtual bliss etc, if the perspective, story, look and feel are as real as you can get but without disturbing yourself too much. People will pay to experience what they can't afford or achieve in life, be scared without dying, famous without being known etc. When voice recognition is successfully added to this experience and gloves, with A.I responding to all of the above, then we'll be getting close to realism. Maybe a little too close in some cases. Remember, sight (graphics) is one sense. Combine a real feeling of motion, sound, depth, communication, interaction, vocal feedback both ways etc, then your brain tells you the images look better than they actually are due to the senses being overwhelmed and the brain slowly being convinced enough that not only is this new, it's convincingly real.
Current gaming is a blip of what's to come in the next 10 years and in all, hardware will have to be more powerful and will get that way anyway. It is the nature of science. It feeds itself, and there is no limits to it.