The graphics are pretty good, but not top notch. But that's only when you consider things like dynamic cloth and hair. Lighting could be improved a bit, but it looks pretty good. Some of the modeling isn't quite what it could be as far as trees go in my opinion, but then that is completely subjective. Those things could have been done (the dynamic cloth and the like) on the 360, as we've seen it in Assassin's Creed, and Fable, but it's not something I'm generally worried about. I won't say graphics make the game, but better graphics do make a good game better.
Both the 360 and PS3 are limited and showing their age. Technology for PC's is constantly developing, there is always new hardware coming out, faster, better, more efficient. Consoles don't develop as fast, sadly. We need the next gen consoles so gaming can move forward and take advantage of the better hardware. Games that are exclusive for the PC generally tend to blow anything on the consoles out of the water. Games that are developed for the consoles and port to PC (which seems to be the norm) don't even come close to reaching the potential of many even mid range PCs.
I'm a PC gamer (and am on my 3rd 360
![Razz :P](http://gamesas.com/images/smilies/icon_razz.gif)
), and get annoyed that Microsoft and Sony want to bleed every coin they can from the current consoles. Can't blame them for it, but as a result the technology stagnates, and so do games.