Do they then become interactive movies rather than games?
Key components of games are goals, rules, challenge, and interaction. Games generally involve mental or physical stimulation, and often both. Many games help develop practical skills, serve as a form of exercise, or otherwise perform an educational, simulational or psychological role.
Mentions nothing of visual experience.
You're missing the point. People will always use the word "game" to refer to all forms of interactive entertainment. Words can assume new meanings over time due to their usage. Our kids will think that the word game means interactive experience, not something where you get points or have rules and goals.
Graphics will certainly continue to improve towards photorealism but this will put huge pressure on art departments in games companies. Already, this is the highest and fastest increasing cost in the development process and we're gonna need a lot more intelligent procedural techniques to be able to continue creating large scale environments. Don't be surprised to see more companies whose sole job is to produce art assets which can be used in many games. Middleware companies will get a LOT bigger.