It's a simple question of "what will this tech offer me in gameplay?" The advancements of the past involving graphics were much more important because many actually altered methods of gameplay from what we were used to. An example is a racing game on the NES and F-Zero on the SNES. Graphically better, but more importantly, the graphic capability allowed a difference in gameplay. The move into the 3rd dimension from the 2nd dimension needs no explanation.
This Cryengine tech has simply taken what is already done, and made it look better and/or allowed for more eye-candy to happen. That is not important enough by itself when it comes to games nowadays. Perhaps it can do something involving gameplay, but that didn't seem to have a focus in the video.
It adds atmosphere and environment. People severely underestimate how much graphics impact the gameplay, and the better they are, the more of an impact they have.
Look at some of the games of yesteryear and their modern counterparts. I think American McGee's Alice is a great example. With his limited tech, he crafted a pretty dark Wonderland, but it still wasn't as broad as it could have been. Over a decade later, he makes Madness Returns, which utilizes modern technology to make a dark, sweeping version of Wonderland that really makes you feel. It's one of the reasons I loved the game.
Or Half Life. Admittedly the setting change is one big thing but do you think City 17 and the diverse locales of Half Life 2 would be possible with GoldSrc? Source was also able to incorporate cutting edge physics into our games to give us one of the most memorable weapons in years (the Gravity Gun). That's not even counting the advanced animation of the time. I mean this game came out in 2004. I mean the PS3 and Xbox 360 weren't even out yet. 8 years later and the game still looks good.
Environment is a huge part of narrative games, and you can't craft a good environment without good graphics. Better graphics open up better narrative options. That's not even counting being able to incorporate more advanced physics and even larger scales. Like a game like GTA IV wouldn't be possible if it wasn't for the tech it used. Or Just Cause 2 is a great example. It's a fucking massive area to play in, it's basically an entire goddamn country, and there's no fog, no loading times between different cities. It's massive and it feels it. And that's what makes the game great.
People severely underestimate the importance of graphics in today's gaming since it seems to be very "nonconformist" to act like graphics don't matter, but they do. I think not cheering on a constant advance in our technology is just stupid. We should praise continued progressive in our games, not want it to halt.
As per production costs though, which is a very valid point, not all games need these high end graphics to create environments and such. Games can still be very moving and atmospheric with lower graphics, depending on the art. But some games need to look realistic and cutting edge to have their atmosphere work, and that's where graphics like these come in.