You know, honestly, I don't even know what half those things are.
Did play around a bit with Oblivion Graphics Extender, though. Light shafts is pretty nifty. Gratuitous, but nifty. But Depth of Field? Holy cow, is that freakin' annoying! Turn that off immediately, the constantly shifting focus as you pan your view around is hideous. :sadvaultboy:
Ambient Occlusion is excellent for a lot of reasons, but the basic idea is to find places where light would have trouble getting in to (Corners and things very close to other things and so on) and "Occlude", or basically shadow them. It's nifty. It wouldn't be a part of a perfect lighting engine, but until we can entirely simulate light bouncing it's a very good solution.
Global Illumination is a term given to trying to achieve that perfect lighting system - we don't just look at direct lighting (From light sources and so on), but also indirect lighting (As it bounces off other objects). This is really computationally heavy and we're not quite up to doing it entirely yet, but if you look at titles like BF3 or Crysis 2, they give it a good shot, and it can look amazing. (Also, if you played Mirror's Edge, they did a lot of indirect lighting and 'baked' it into the levels. Looked amazing, but wasn't real time - we want to do that in real time)
Light Shafts are, well, we all know what light shafts are. Really pretty, but little else - but who needs more than "Oh god they're so pretty" anyway.
DoF *can* be used properly. Solutions based on where your pointer is are not properly, they have the fundamental flaw of assuming your eyes are focussing on the pointer, and this is almost never the case. What DoF *can* do for you is blur distant land in a convincing way, both masking imperfections in the LOD system and giving a greater impression of scale.
Colour Grading is very much what it sounds like, changing the colours of the screen. Sounds boring, but can really help in giving different environments unique feels.
Tessellation is, as I'm sure you already know, a system that allows you to create meshes on the fly from a displacement map, most useful in smoothly scaling in detail as you get close to something, but can also make for other nifty effects, like fancier water and so on.
POM is a method of giving flat objects more shape. It's like bump mapping turned up to 11, because the objects are actually given shape, and you can do all kind of fancy thing like self-shadowing it, or just having relatively cheap, but still excellent looking, objects.
Certainly a game doesn't *need* all these buzzwords to look good, to say such a thing would be mad. However, some graphical styles need more power than others, and while I remain unconvinced anything will ever be prettier than Yoshi's Island, if you're going to do realistic lighting in a semi-realistic 3D world, you cannot sidestep some things with "Style". For some things it isn't style - most old 3D games look awful for a reason, because they simply didn't have enough power to realise their graphical style. Hell, most *modern* 3D games look awful for exactly the same reason, attempting to be realistic without the ability to produce realism. No, graphics aren't everything, but that does not mean you should skimp on it. If you don't want to put the effort in, please pick an art style where it won't be painfully obvious!
edit: And, just for the (Broken? Stuck?) record, my PC was around $500 and maxes out just about everything. PC gaming isn't all that expensive any more, especially when you consider the cost of games over its lifetime. If you buy a lot of games, it'd be cheaper than console gaming.