Mario is Unreal

[salm]

and then there's things like how cloth moves or liquids, we're still far from anything "realistic".

After seeing the NVidia Flex demos I don´t think we are very far from decent real time liquids, smoke, cloth and granular particles.

Those are all fine and well in a vacuum. But try rendering that sort of thing in real time and in a semi-unpredictable system at 60 FPS.

Nvidia Flex is real time.
Equivalent non real time simulations such as Realflow or the ones integrated in Blender have been around for ages.

Actually parts of Flex will be implemented into Killing Floor 2 which will be released this year.
It is also free and apparently easy to implement with the Unreal 4 engine so I expect to see a couple of games using it soon.

[salm]

This. In fact it is a well documented phenomenon that as things approach a certain degree of realism our ability in this skyrockets to the point that the "super realistic" becomes very uncanny.[*][/url][/super]

I hear the uncanny valley usually applied to human characters. That is because humans are very good at examining humans. With other things humans are significantly worse at identifying flaws. So in a way it is a lot easier to portray believable "realstic" water than it is to portray believable "realistic" humans.

[Lord Revan]

This. In fact it is a well documented phenomenon that as things approach a certain degree of realism our ability in this skyrockets to the point that the "super realistic" becomes very uncanny.[*][/url][/super]

I hear the uncanny valley usually applied to human characters. That is because humans are very good at examining humans. With other things humans are significantly worse at identifying flaws. So in a way it is a lot easier to portray believable "realstic" water than it is to portray believable "realistic" humans.

the Uncanny Valley effect is strongest in depiction humans, but not exclusive to them. As a rule of thumb the less "real" something is, less likely it will trigger the effect, so for example orcs or gryphon and such can have more flaws then humans cause humans haven't seen orcs or gryphons in real life and thus don't have innate understanding how they move. Obviously it's not quite that simple but it's a good basic rule.

[salm]

This. In fact it is a well documented phenomenon that as things approach a certain degree of realism our ability in this skyrockets to the point that the "super realistic" becomes very uncanny.[*][/url][/super]

I hear the uncanny valley usually applied to human characters. That is because humans are very good at examining humans. With other things humans are significantly worse at identifying flaws. So in a way it is a lot easier to portray believable "realstic" water than it is to portray believable "realistic" humans.

the Uncanny Valley effect is strongest in depiction humans, but not exclusive to them. As a rule of thumb the less "real" something is, less likely it will trigger the effect, so for example orcs or gryphon and such can have more flaws then humans cause humans haven't seen orcs or gryphons in real life and thus don't have innate understanding how they move. Obviously it's not quite that simple but it's a good basic rule.

Yeah, but Orks are sufficiently human like to apply the uncanny valley to them. Water or Smoke is not so applying the uncanny valley is rarely, if ever useful.
I don´t think the uncanny effect in the sense that we find artificial water creepy or unsettly because of it´s similarities to real water even applies at all. I have never seen something like that. If you have some example for it, or some other uncanny inanimate object I´d be very interested.
That´s why architectural renderings (which are often produced to look as real as possible but on a very low budget) work pretty decently as long as you leave out "realistic" CG humans.

[TheFeniX]

This. In fact it is a well documented phenomenon that as things approach a certain degree of realism our ability in this skyrockets to the point that the "super realistic" becomes very uncanny.[*][/url][/super]

I hear the uncanny valley usually applied to human characters. That is because humans are very good at examining humans. With other things humans are significantly worse at identifying flaws. So in a way it is a lot easier to portray believable "realstic" water than it is to portray believable "realistic" humans.

This is actually why stylistic choices work better on humans and animals for realism. We can make out a person from 5 sticks and a circle. As we make the character more detailed, the character becomes more realized, but also your brain starts filling in missing details. You finally reach a point where, at a quick glance, you can't even point out the stylistic choices made because the character looks real to you. We're so used to seeing stylized humans on TV and pictures with how prevalent make-up and photoshop is, it's sometimes impossible looking at a rendered character as see where they made their stylistic choices. Animals are in the same vein.

What we almost always DO know is how humans and animals move, or at least enough to know when it's dead wrong. This is why Scud is terrifying at times to me. I've been around dogs all my life, they do not move or emote like Scud does in Toy Story. Everything about him screams "This thing is fake, stay the Hell away from it." Meanwhile, Woody also moves in an incredibly janky and unrealistic way, like a string puppet (purposely). But his design is completely cartoonish, so there's no valley there.

Smoke, water, etc: humans have a general idea on what's going on there. We know smoke isn't layered sprites/3D models spawned at Y+1 intervals, so old smoke in games looks very fake, even to the untrained. But even the most basic of procedurally generated smoke, provided it's at high enough resolution/quality, can pass for real. The PS2 could fake "real" water enough you wouldn't notice, at least unless you were playing a water sim. Fire is still hit or miss.

[salm]

Smoke, water, etc: humans have a general idea on what's going on there. We know smoke isn't layered sprites/3D models spawned at Y+1 intervals, so old smoke in games looks very fake, even to the untrained. But even the most basic of procedurally generated smoke, provided it's at high enough resolution/quality, can pass for real. The PS2 could fake "real" water enough you wouldn't notice, at least unless you were playing a water sim. Fire is still hit or miss.

I´ve never seen Toy Story so I can´t really comment on that.

Fake and uncanny aren´t the same. Everybody can spot a cartoon character as fake.
Uncanny is the thing that weirds people out when they see it and i´ve never heard about inanimate objects doing that.

A bit off topic and perhaps technical and boring:
Concerning the PS2 and water. It depends massivly on what kind of water. A body of water like a lake or even an ocean with waves is technically something completely different than something like water gushing from a pipe or blood from a vein. The former is very easy to render so that even a PS2 can render it halfways decently. It´s usually just basic geometry (sometimes animated) with a nice reflection, refraction and some kind of animated bump map.
The latter is complicated and CPU (or GPU) instensive making it impossible to decently implement up til now and usually involves some sort of particle simulation combined with an isosurface algorithm (e.g. marching cubes) that creates a mesh "over" these paricles on the fly.
The same goes for smoke.
Other types of objects that work similarily are cloth and hard body as well as soft body simulations.
One of the interesting things about Flex is that the underlying particle simulation of all sub categories (water, smoke, cloth, sand...) is the same which means that they can interact with each other.