I chose the rocks in that screen because they are particularly blatant. It is not simply those rocks, or even simply the scenery. It's pretty much every texture out there, in every screenshot. There are a few places where you can see what appear to be normal maps, but it's very rare.
So it's not just scenery, it's characters and monsters too. It's simply a lack of detail.
And it's not really graphics so much as atmosphere. Appearance, perception, that kind of thing. The feeling that you get while playing the game.
For example, someone in the monster thread said they didn't think Oblivion Knights were too scary looking in Diablo II, they were only feared because of Iron Maiden. I don't entirely disagree (I think the graphics for OKs was appropriate), but it's the same point - the graphics and appearance of things needs to back up the gameplay reality. Otherwise the game loses a lot of its ability to actually inspire fear, get adrenaline pumping, be exciting.