All I can think of are sports games like FIFA, or side quests in Red Dead Redemption. Any other suggestions?
I am interepreting great visuals broadly to include great art direction, but there are some very nice looking realistic 3D games in that list
Some other ones that I don't particularly care for but that many people love: Disco Elysium, Outer Wilds, Return of the Obra Dinn
There are also many great games that feature combat as a core mechanic but are no more "about it" than The Odyssey or The Seven Samurai are. For example: Yakuza 0, Kenshi, INSOMNIA: The Ark, Vampyr, Valakas Story, Pathologic 2, Ghost of a Tale, A Plague Tale
If they are trying to make a game based off that universe, with the same actors/actresses, why would they not aim for the most realistic possible portrayal possible?
Your statement also ignores phenomenal games like Flower, Journey, NiGHTS Into Dreams - your statement even excludes the Mario series. Even 'Halo' has imaginative worlds that can benefit from photorealism.
Photorealism does not remove creativity. It's also a standard, a boundary to which digital artists have aspired to since the beginning of the medium.
You might as well ask why realist painting is a thing?
The Matrix demo is set in a city because (a) that's where the Matrix is set, and (b) it's relatively "easy" to do photo-realism in a city because you can use actual photos, and because other than the people the objects are reflective shiny boxes or surfaces.
I also wonder if it's cheaper.