Realism is the close resemblance to what is real; fidelity of representation, rendering the precise details of the real thing or scene.
The problem with achieving realism is that the closer we get to 'real' without actually reaching it; the less real it looks. If we are to create a cartoon character with exaggerated features we accept that it is a cartoon and feel comfortable watching it, but if we see something that looks like a real figure but with slight deformities we immediately think it doesn't look right. This is known as the 'Uncanny Valley.'
A game I recently returned to after a long break (we were seeing other people) was 'Gears Of War' a very popular game that doesn’t exactly strive for realism in terms of its characters but certainly has some relative aspects that I'd like to discuss. The iconic 'Unreal Engine' body shapes are far removed from a realistic soldier but the realism lies in other areas of the game. When entering a sprint the camera lowers to the characters hip and a slight motion blur gives the player the feeling that they are actually running. This combined with camera shake when running up against a wall, realistic well cued audio and your vision being obstructed by blood when you are wounded actually makes a rather realistic experience. None of us really know how the world will look post-apocalypse but we can be sure that 'Epic Games' have come very close with their dark unsaturated textures of buildings and streets.
For a player to get scared in a game there needs to be a considerable amount of realism, and no game makes you jump out of your skin quite like 'GOW,' which just shows it's not necessarily the look of the characters that give a realistic experience.