Graphics are just what you see in the game. It could be simple 2D square to 3D complete recreations of cities. The scale is just that dynamic, but better graphics doen't mean better game. Graphics also don't translate into higher drive capcity requirements. Lots of people make lots of different games that have lots of different graphics. Some may be more appealing than others but I personally believe that graphics shouldn't be what keeps players playing, but they are pretty to look at.
I'm not the most up to date on graphics, but the few classes I have the honor to take are making me aware of what it takes to create assets for games. 3D objects are amazing to see but even more impressive once you figure out how they work. Without paper, most objects start out as blocks assembled to form a silhouette of what it's actually supposed to be. After assembly, you can use tools to cut, shape and mold what you have into what you really want it to be. With 3D modeling, your imagination is your only limitation.