Call Of Duty 4 uses no terrain:
it has great graphism,but i prefer a lot battlefield Bad Comapany for it's bigger outdooors : allow you to really hide in the trees/plants far far away from ennemies : here the terrain is king !

Oblivion is great , big outdoors and great dungones/towns,
it's not simple : travel/kill monsters on terrains game.

But i agree lot of new games have just a terrain and assets just "posed" on it : empty games like some mmorpg.

In fact terrains allow to create very big outdoors with very good performances and AAA 3D engines have all the tools
to create/modify terrains in the fly quickly.
It's not the fault of terrains if some game companies make empty games with that great technologie.